The authors wish to thank the editor, Paul Evans, and an anonymous referee for useful comments and suggestions. The authors remain solely responsible for any error.
Public Sector Debt Dynamics: The Persistence and Sources of Shocks to Debt in 10 EU Countries
Article first published online: 17 MAR 2013
© 2013 The Ohio State University
Journal of Money, Credit and Banking
Volume 45, Issue 2-3, pages 277–298, March-April 2013
How to Cite
ANTONINI, M., LEE, K. and PIRES, J. (2013), Public Sector Debt Dynamics: The Persistence and Sources of Shocks to Debt in 10 EU Countries. Journal of Money, Credit and Banking, 45: 277–298. doi: 10.1111/jmcb.12002
- Issue published online: 17 MAR 2013
- Article first published online: 17 MAR 2013
- Received June 27, 2011; and accepted in revised form May 14, 2012.
- public sector debt;
- debt:GDP ratio;
- debt sustainability;
This paper characterizes the time-series properties of debt:GDP ratios in 10 EU countries over 1982–2009 and measures the size and source of the permanent effects of shocks as they evolve over time. The analysis shows debt dynamics in the EU10 are complicated, involving important intercountry interactions and protracted adjustment periods of about 10 years. We find evidence of asymmetries in the effects of different forms of “fiscal consolidation,” with unanticipated reductions in government spending having a more permanent effect than unanticipated increases in government revenue. Unanticipated business cycle fluctuations also have important long-term effects on the ratio.