The Global Dimension to Fiscal Sustainability



Table 2: Nonstationary Panel Estimation with Factors

Model with No Factor_______________________________

Fixed Effects

0.054
______________(6.232)______________

Model with Stationary Factor_________________________

Bai and Kao (2006)

CupFM_________

0.059
_____________(12.951)_____________

Model with Nonstationary Factor______________________

Bai et al. (2007)
CupBC__________

0.018

______________(7.287)______________

Bai et al. (2007)

CupFM_________

0.039
_____________(12.341)_____________

Notes: Panel data set is 1978 to 2005 (N=15, T=28). Estimation results
are based on equation (15) sit = αi + ρdit + λiFt, where a factor (Ft) is
included. t-statistics in parentheses and in bold with a star (*) if
significant at the 5% level. An information criterion from Bai and Ng
(2002) suggests a factor is appropriate. Bai and Kao (2006)
continuously updated fully modified (CupFM) estimator has a
stationary factor. Bai et al. (2007) continuously bias corrected CupBC
and CupFM has a nonstationary factor.

26



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