Assessing non-linearities and heterogeneity in debt sustainability analysis : a panel spline approach / Benjamin Owusu, Bettina Bökemeier, Alfred Greiner
VerfasserOwusu, Benjamin ; Bökemeier, Bettina ; Greiner, Alfred
ErschienenBielefeld, Germany : Universität Bielefeld, Faculty of Business Administration and Economics, May 2021
Elektronische Ressource
Umfang1 Online-Ressource (25 Seiten) : Diagramme
SerieWorking papers in economics and management ; No. 10-2021
SchlagwörterEuropäische Union / Volkswirtschaft / Öffentliche Schulden / Schuldenquote / Geschichte 2000-2019
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Assessing non-linearities and heterogeneity in debt sustainability analysis [0.74 mb]

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 coe cient 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 at 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 ' scal fatigue', meaning that the e ort of active scal counter-steering peters out for high ratios of public debt to GDP. The same e ect can be observed for the whole sample and for a sample including the large EU economies, once Greece is removed.

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