TY  - GEN
AB  - This paper empirically studies public debt sustainability with the penalized panel
splines approach for 25 EU economies from 2000 to 2019 by estimating the response
of the primary surplus to lagged debt relative to GDP, respectively. A positive
coecient on average indicates sustainable policies, which is supported by all our
results. Moreover, we show that this relationship is not homogeneous across the
distribution of the debt ratios, but, varies with the magnitude of public debt to
GDP. The estimations reveal a strongly increasing reaction for small and high debt
ratios while it is rather flat for intermediate levels. This holds for normal times, too,
whereas during years of economic crises a monotonously increasing response can be
observed. Additionally, for a cluster consisting of smaller EU economies, there is
indication of 'fiscal fatigue', meaning that the effort of active fiscal counter-steering
peters out for high ratios of public debt to GDP. The same effect can be observed for
the whole sample and for a sample including the large EU economies, once Greece
is removed.
DA  - 2021
DO  - 10.4119/unibi/2954860
KW  - Debt sustainability
KW  - fiscal response function
KW  - panel spline estimation
LA  - eng
PY  - 2021
SN  - 2196-2723
SP  - 27-
TI  - Assessing non-linearities and heterogeneity in debt sustainability analysis: A panel spline approach
UR  - https://nbn-resolving.org/urn:nbn:de:0070-pub-29548606
Y2  - 2024-11-22T12:38:39
ER  -