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Sustainability and comovement of government debt in EMU Countries: A panel data analysis
Author(s) -
Brady Gordon L.,
Magazzino Cosimo
Publication year - 2018
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/soej.12269
Subject(s) - austerity , solvency , panel data , economics , government debt , unit root , debt , fiscal sustainability , monetary economics , fiscal policy , sustainability , panel analysis , european monetary union , government (linguistics) , macroeconomics , monetary policy , econometrics , market liquidity , political science , ecology , linguistics , philosophy , politics , biology , law
We investigate the sustainability of fiscal policy in a set of 19 European Monetary Union (EMU) countries over the period 1970–2016. Panel unit root tests in the presence of cross‐section dependence show that the government debt series is stationary, indicating that the solvency condition would be satisfied for these countries. This confirms the effectiveness of the austerity measures implemented by these member states. Moreover, an unobserved common factor drives the comovement of government debt in the Eurozone.