A Nonlinear Approach to Public Finance Sustainability in Latin America

U of London Queen Mary Economics Working Paper No. 486

20 Pages Posted: 7 Aug 2003

See all articles by Georgios E. Chortareas

Georgios E. Chortareas

University of Athens - Faculty of Economics; University of Essex - Department of Accounting, Finance & Management; King's College London

George Kapetanios

King's College, London

Merih Uctum

City University of New York (CUNY) - Brooklyn College & the Graduate Center - Department of Economics; City University of New York (CUNY) - Graduate Center

Date Written: January 2003

Abstract

Public finance sustainability plays a central role in the stabilization efforts in Latin America. The emphasis on fiscal policy in these countries goes back to the debt crisis of the 1980s, which was associated with large fiscal imbalances. We analyze the sustainability of government debt for a sample of Latin American countries, employing unit root tests that incorporate nonlinear alternative hypotheses. These tests capture the potential thresholds or corridor behavior that international agreements or markets impose on emerging economies' public finances. We show that support for sustainability substantially improves when the possibility of nonlinear mean-reversion is taken into account.

JEL Classification: H6, H87

Suggested Citation

Chortareas, Georgios and Kapetanios, George and Uctum, Merih, A Nonlinear Approach to Public Finance Sustainability in Latin America (January 2003). U of London Queen Mary Economics Working Paper No. 486. Available at SSRN: https://ssrn.com/abstract=370084 or http://dx.doi.org/10.2139/ssrn.370084

Georgios Chortareas

University of Athens - Faculty of Economics ( email )

8 Pesmazoglou street
GR-10559 Athens
Greece
+(30) 210 3689805 (Phone)
+(30) 210 3689810 (Fax)

University of Essex - Department of Accounting, Finance & Management ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

King's College London ( email )

Strand
London, England WC2R 2LS
United Kingdom

George Kapetanios

King's College, London ( email )

30 Aldwych
London, WC2B 4BG
United Kingdom
+44 20 78484951 (Phone)

Merih Uctum (Contact Author)

City University of New York (CUNY) - Brooklyn College & the Graduate Center - Department of Economics ( email )

Bedford Avenue and Avenue H
Brooklyn, NY 11210-9966
United States
718-951-5317 (Phone)

City University of New York (CUNY) - Graduate Center ( email )

365 Fifth Avenue, 5th Floor
New York, NY 10016
United States

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