Disturbing the fiscal theory of the price level: Can it fit the eu-15?

Table 2 - Estimation of equation (27), dependent variable: primary surplus as a
______________ percentage of GDP (.V)    ______________

The t statistics are in parentheses.

a - The degrees of freedom for the F statistic are in parentheses; the statistic tests the fixed
effects model against the pooled regression model, where the autonomous term is the same for
all countries, which is the null hypothesis.

b - The statistic has a Chi-square distribution (the degrees of freedom are in parentheses); the
Hausman statistic tests the fixed effects model against the random effects, which is here the null
hypothesis.

* - Statistically significant at the 1 percent level, the null hypothesis of the pooled regression
model is rejected.

** - Statistically significant at the 1 per cent level, the null hypothesis is rejected (random
effects model), that is, one rejects the hypothesis that the autonomous terms in each country is
not correlated with the independent explanatory variables (in this case the random effects model
does not produce unbiased and consistent estimators).

Additionally, one may also try to estimate the following model

B_jt — Œ + vS_it 1 + Φ B_jt 1 + v_it

it i i it — 1 τ it — 1 it ,

where S is the primary surplus as a percentage of GDP, B is the debt-to-GDP ratio, the
index i denotes the country, the index t indicates the period and a_i stands for the
individual effects to be estimated for each country i. One may then put forward the
following ideas:

i) the hypothesis of a Ricardian regime, of monetary dominance, is not rejected
when γ < 0, most likely the government is using budget surpluses to reduce
outstanding public debt;

24

<<   <   21   22   23   24   25   26   27   >   >>