Is the government's intertemporal budget constraint fulfilled in Sweden? An application of the Kalman filter

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14 Citations (Scopus)

Abstract

This paper deals with the issue of whether the Government complies with its budget constraint for the case of Sweden during the period 1963-2000 using quarterly data. It is found that government spending and government revenue are nonstationary (integrated) but cointegrated. A random coefficient model against a fixed coefficient model is also tested for. The results show that the random coefficient model, which is nonlinear, is preferred to the linear fixed parameter model. This model, which takes into account the Lucas critique, is estimated by the Kalman filter and it provides further empirical evidence that the government follows its intertemporal budget restriction.

Original languageEnglish
Pages (from-to)433-439
Number of pages7
JournalApplied Economics Letters
Volume9
Issue number7
DOIs
Publication statusPublished - 2002
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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