Testing Sustainability of German Fiscal Policy. Evidence for the Period 1960-2003

32 Pages Posted: 28 Jan 2005

See all articles by Alfred Greiner

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Uwe Koeller

Bielefeld University - Department of Business Administration and Economics

Willi Semmler

The New School - Department of Economics; Universitaet Bielefeld; IIASA

Date Written: January 2005

Abstract

In this paper, we test whether German public debt has been sustainable by resorting to a test proposed by Bohn (1998). We apply non-parametric and semi-parametric regressions with time depending coefficients. This test shows that the mean of the coefficient relevant for sustainability has been significantly positive over the time period considered. However, there is a negative trend in that coefficient which seems to have ceased to decline only in the middle to late 1990s. Further, we find evidence that the response of the primary deficit is a U-shaped function of the debt ratio which first declines and then rises after a certain threshold of the debt ratio is exceeded.

Keywords: Public debt, intertemporal budget constraint, varying coefficient model, nonparametric estimation

JEL Classification: H63, E62

Suggested Citation

Greiner, Alfred and Koeller, Uwe and Semmler, Willi, Testing Sustainability of German Fiscal Policy. Evidence for the Period 1960-2003 (January 2005). CESifo Working Paper Series No. 1386. Available at SSRN: https://ssrn.com/abstract=648646

Alfred Greiner (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
Bielefeld, 33501
Germany
+49 521 106 4859 (Phone)
+49 521 106 67120 (Fax)

HOME PAGE: http://phoenix.wiwi.uni-bielefeld.de/lehrbereiche/vwl/wipol

Uwe Koeller

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

Willi Semmler

The New School - Department of Economics ( email )

65 Fifth Avenue
New York, NY 10003
United States

HOME PAGE: http://www.newschool.edu/nssr/faculty/?id=4e54-6b79-4e41-3d3d

Universitaet Bielefeld ( email )

Universit├Ątsstra├če 25
Bielefeld, NRW
Germany

IIASA ( email )

Schlossplatz 1
Laxenburg/Austria, A-2361
Austria

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