The Global Dimension to Fiscal Sustainability

Table 7 Factor Identification

Notes: Johansen (1988) Trace Test examines whether there is cointegration between a common factor
from Bai and Ng (2004) PANIC and US interest rates (T-Bill rate). The null of cointegrating vectors is
given by r and the number of stochastic trends by p-r. Model selected on the basis of a model reduction
procedure and residuals are reasonably well specified. P-values are in square brackets based on simulated
critical values and a Bartlett correction from Johansen (2002). Star (*) and bold indicates significant at
the 5% level.

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