Working Paper BETA #2022-11

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Title : Assessing Debt Stationarity and Sustainability in the Longer Run with Fourier DF Unit Root Tests and Time-Varying Fiscal Reaction Functions

Author(s) : Jamel Saadaoui, Marco Chi Keung Lau, Yifei Cai

Abstract : Thanks to various Fourier DF unit root tests and time-varying fiscal reaction functions, this study examines the stationarity and the sustainability of public finance for six industrial countries over the period spanning from 1870 to 2017. Longer-run debt sustainability is not rejected for the UK, Sweden, and for the US. The evidence is more mixed for Canada, Italy and Portugal.

Key-words : Fourier DF unit root test, Debt sustainability, Public debt, Primary balance

JEL Classification : C22, E62, H62