Panel Cointegration Tests on the Fiscal Sustainability of German Laender

26 Pages Posted: 16 Sep 2014

See all articles by Heiko Burret

Heiko Burret

Walter Eucken Institute

Lars P. Feld

Walter Eucken Institute

Ekkehard A. Koehler

University of Siegen - Department of Economics; Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences

Date Written: August 15, 2014

Abstract

This paper provides new evidence on the sustainability of public finances in German states (Laender) by exploiting a newly compiled database covering the years 1950‐2011. Unlike previous studies on Germany, we analyze fiscal sustainability by applying “second generation” panel cointegration techniques. A unique identification strategy for the selection of sub‐panels improves the robustness of panel cointegration tests and reveals that Laender finances are hardly sustainable.

Keywords: fiscal sustainability, federalism, unit root, panel cointegration

JEL Classification: H620, H770, H720

Suggested Citation

Burret, Heiko and Feld, Lars P. and Koehler, Ekkehard A., Panel Cointegration Tests on the Fiscal Sustainability of German Laender (August 15, 2014). Available at SSRN: https://ssrn.com/abstract=2496332 or http://dx.doi.org/10.2139/ssrn.2496332

Heiko Burret

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg, 79100
Germany

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

Ekkehard A. Koehler

University of Siegen - Department of Economics ( email )

Department of Economics
Hoelderlinstr. 3
Siegen, 57068
Germany

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg, 79100
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

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