UK Fiscal Policy Sustainability, 1955–2006

31 Pages Posted: 12 Oct 2013

See all articles by Jingwen Fan

Jingwen Fan

Jinan University

Michael Arghyrou

University of Piraeus

Date Written: December 2013

Abstract

We test for fiscal policy sustainability in the UK over the period 1955–2006. We find evidence of sustainability with three structural breaks, respectively occurring in the early 1970s, early 1980s and late 1990s. UK fiscal policy was not sustainable between 1973 and 1981. Within the fiscal regimes correction of fiscal disequilibrium occurs through adjustments in public revenue. Changes in fiscal regimes, however, occur through shifts in public expenditure. UK authorities do not react to relatively small deficits but correct exceedingly large deficits relatively fast. Finally, the recent financial crisis may have caused a substantial deterioration of UK fiscal dynamics.

Suggested Citation

Fan, Jingwen and Arghyrou, Michael, UK Fiscal Policy Sustainability, 1955–2006 (December 2013). The Manchester School, Vol. 81, Issue 6, pp. 961-991, 2013. Available at SSRN: https://ssrn.com/abstract=2339380 or http://dx.doi.org/10.1111/j.1467-9957.2012.02319.x

Jingwen Fan

Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

Michael Arghyrou

University of Piraeus ( email )

Karaoli & Dimitriou 80
Piraeus, 18534
Greece
19 (Fax)

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