The name is absent

Table 2.3 Fiscal Reaction Function: Econometric Results for the Baseline Model

Note: The sample period is 1997-2005.

Models estimated by OLSQ with heteroskedastic-consistent standard errors;
'***' significant at 1%; '**' significant at 5%; '*' significant at 10%.

Source: European Commission for EU15 and OECD for US and Japan.

In general, and given its simplicity, the explanatory power of the model is relatively good.
In any case, it is comparable or better than other estimates in the literature, such as
Ballabriga and Martinez-Mongay (2003) or Bohn (2005a). The explanatory power is high
in Belgium, Greece, Spain, Italy, Ireland, Finland, Denmark, Sweden, UK, US and Japan,
where 75% or more of the variability of the primary surplus within the sample period is
explained by the stock of debt, the output gap and the inertia. However, in some cases,
such as Germany, France and Austria the explanatory power of the model is lower. In
addition, although in many countries the model passes the usual specification tests, in
others, such as Belgium, France, Portugal, Denmark, Sweden, US and Japan, the h-
Durbin statistic suggests a clear departure from the white noise hypothesis for the
residuals.

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