The Global Dimension to Fiscal Sustainability



Table 8: GMM Systems Estimates

Emerging
________
Markets______

Industrial
_______
Countries______

Debt

0.028*

___________(2.10)

0.011*
(2.41)

Output Gap

0.118

___________(1.33)

0.303*

___________(2.77)_________

Spending Gap

-0.017

____________(-0.81)_________

-0.269*

___________(-5.36)_________

Interest Expenditure

0.008*

___________(2.13)

0.032*

___________(3.67)_________

Lagged dependent

0.139*

___________(2.15)

0.524*

__________(13.50)________

Ml

-3.31*        ~

-3.01*

M2___________

____________-1.88__________

___________-1.07_________

Sargan Test__________

___________0.883_________

__________0.488_________

Notes: In this table the dependent variable is primary surplus (psit). M1 and M2 are tests for first order
and second order autocorrelation and are asymptotically normal. t-statistics in parentheses are based
upon Windmeijer (2005) finite sample corrected standard errors robust to serial correlation and
heteroscedasticity. Star (*) and bold indicates significant at the 5% level. Sargan Test of overidentified
restrictions reports p-values (small p-value rejects the validity of the instruments). Year dummies and
instruments t-3 and greater are included.

32



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