期刊名称：Euro Area Balance of Payments and International Investment Position Statistics
印刷版ISSN：1830-3420
电子版ISSN：1830-3439
出版年度：2012
出版社：European Central Bank
摘要：Do capital markets impose scal discipline on governments? We investigate the responses of scal variables to a change in the interest rate paid by governments on their debt in a panel of 14 European countries over four decades. This is done in the context of a panel vector autoregressive (PVAR) model, using sign restrictions via the penalty function method of Mountford and Uhlig (2009) to identify structural cost of borrowing shocks. Our baseline estimation shows that a one percentage point rise in the cost of borrowing leads to a cumulative improvement of the primary balance-to-GDP ratio of approximately 1.9 percentage points over 10 years, with the scal response becoming signi cantly evident only two years after the shock. We also nd that the bulk of scal adjustment takes place via a rise in government revenue rather than a cut in primary expenditure. The size of the total scal adjustment, however, is insu¢ cient to avoid the gross government debt-to-GDP ratio from rising as a consequence of the shock. Sub-dividing our sample, we also nd that for countries participating in Economic and Monetary Union (EMU) the primary balance response to a cost of borrowing shock was stronger in the period after 1992 (the year in which the Maastricht Treaty was signed) than prior to 1992.
