Fiscal Sustainability of the German Laender Time Series Evidence

27 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

In this paper we analyze the sustainability of public finances in the states (Laender) of the Federal Republic of Germany using an unprecedentedly comprehensive fiscal dataset for the time period from 1950 to 2011 for West German Laender and 1991 to 2011 for East German Laender, respectively. In order to assess the fiscal sustainability of the (Laender) we, first, examine the stationarity characteristics of public debt, revenues and expenditures. Second, we explore the long‐run relation between expenditures and revenues in a cointegration analysis within each Land. The results provide evidence against strict fiscal sustainability in most of the 16 German Laender. A notable exception to this finding is Bavaria.

Keywords: fiscal sustainability, federalism, unit root, cointegration, public debt

JEL Classification: H620, H770, H720

Suggested Citation

Burret, Heiko and Feld, Lars P. and Koehler, Ekkehard A., Fiscal Sustainability of the German Laender Time Series Evidence (August 15, 2014). CESifo Working Paper Series No. 4928, Available at SSRN: https://ssrn.com/abstract=2496352

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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