TITLE:
Sustainability of the Greek Government Net Borrowing: An Analytical and Comprehensive Exposition
AUTHORS:
Anna Maria Mouza
KEYWORDS:
Debt Sustainability, Autocorrelation, Homoscedasticity, Co-Integration, Greek Debt
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.4,
August
15,
2016
ABSTRACT: This paper aims to
investigate the sustainability of the
general Greek government net borrowing, applying novel techniques for both to
determine the order of integration of a difference stationary series and to specify the final form of the
co-integration equation.
Co-integration analysis was applied, and robust rules of thumb are suggested
taking into account the individuality of the case under consideration. The empirical application
revealed that the Greek debt is not
sustainable. Further, we introduce consistent planning methods to obtain optimal time paths for both government revenue
and spending, so as sustainability of the
debt to become a feasible task under certain assumptions. Finally, we
suggest a policy making approach on macrolevel combining co-integration with optimal control.