A “litmus test” of Deficit Sustainability: The Case of the Greek Budget Deficit
Journal Title: Review of Economics & Finance - Year 2016, Vol 6, Issue 3
Abstract
The paper applies three sustainability tests to the Greek budget deficit, which is known to be unsustainable, and can therefore be used to check the reliability of the three tests. Using three deficit definitions, i.e., in levels, in per capita terms, and in percent of GDP, I find the following results: (1) the unit-root test rejects sustainability only for the last definition; (2) the Hakkio-Rush test does not reject sustainability for any definition; and (3) the Hatzinikolaou-Simos test, which is applicable only for the first two definitions, strongly rejects sustainability, and so it proves to be more reliable, as expected.
Authors and Affiliations
Dimitris Hatzinikolaou
Keywords
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