UPM Institutional Repository

Assessing the mean reversion behaviour of fiscal policy: the perspective of Asian countries


Lau, Evan and Baharumshah, Ahmad Zubaidi (2009) Assessing the mean reversion behaviour of fiscal policy: the perspective of Asian countries. Applied Economics, 41 (15). pp. 1939-1949. ISSN 0003-6846; ESSN: 1466-4283


This article investigates fiscal policy sustainability in 10 Asian countries by adopting a battery of unit root tests. Univariate unit root tests reveal that the fiscal stance in these countries follows a nonstationary process while the opposite conclusion was drawn for the same dataset using the commonly employed panel unit root techniques. By utilizing the series-specific panel unit-root test recently developed by Breuer et al. [2002, SURADF (Seemingly Unrelated Regression Augmented Dickey-Fuller)] that allows testing for the presence of nonstationarity within individual cross sections of the panel, we found that only cross sections four out of 10 countries in the panel are stationary. This means that fiscal deficits in most Asian countries are in violation of their intertemporal budget constraint and that the deficits are too large.

Download File

PDF (Abstract)
Assessing the mean reversion behaviour of fiscal policy.pdf

Download (83kB) | Preview

Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
DOI Number: https://doi.org/10.1080/00036840601131755
Publisher: Routledge
Keywords: Fiscal policy; SURADF; Intertemporal budget constraint; Asia
Depositing User: Nabilah Mustapa
Date Deposited: 16 May 2015 02:19
Last Modified: 05 Oct 2015 06:01
Altmetrics: http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1080/00036840601131755
URI: http://psasir.upm.edu.my/id/eprint/13297
Statistic Details: View Download Statistic

Actions (login required)

View Item View Item