Panel Cointegration Tests on the Fiscal Sustainability of German Laender

26 Pages Posted: 16 Sep 2014

See all articles by Heiko Burret

Heiko Burret

Walter Eucken Institute

Lars P. Feld

Walter Eucken Institute

Ekkehard A. Koehler

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences

Date Written: August 15, 2014

Abstract

This paper provides new evidence on the sustainability of public finances in German states (Laender) by exploiting a newly compiled database covering the years 1950‐2011. Unlike previous studies on Germany, we analyze fiscal sustainability by applying “second generation” panel cointegration techniques. A unique identification strategy for the selection of sub‐panels improves the robustness of panel cointegration tests and reveals that Laender finances are hardly sustainable.

Keywords: fiscal sustainability, federalism, unit root, panel cointegration

JEL Classification: H620, H770, H720

Suggested Citation

Burret, Heiko and Feld, Lars P. and Koehler, Ekkehard A., Panel Cointegration Tests on the Fiscal Sustainability of German Laender (August 15, 2014). CESifo Working Paper Series No. 4929, Available at SSRN: https://ssrn.com/abstract=2496332

Heiko Burret

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg, 79100
Germany

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

Ekkehard A. Koehler

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg, 79100
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

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