Heterogeneous Effects of Fiscal Rules Under the Maastricht Fiscal Criterion: Budget Fiscal Deficit and Debt Sustainability Analysis

Vîntu, Denis (2024): Heterogeneous Effects of Fiscal Rules Under the Maastricht Fiscal Criterion: Budget Fiscal Deficit and Debt Sustainability Analysis. Published in: National Institute of Economic Research Conference , Vol. 10, No. 2024/10 (October 2024): pp. 1-21.

Abstract

We contend that ambivalence or uncertainty regarding the error terms may be the root cause of many methodological misunderstandings in time-series econometrics. Macroeconomic time series have imprecise relationships, and early econometricians invariably discovered that any estimated relationship would only fit with errors. Second part is designed to quarterly estimated structural macro econometric model for the Republic of Moldova, denoted A Classical Macroeconometric Data Model for the Republic of Moldova (MDM) in context of Neo-Classical Approach of the Economy. We have interpreted the term error from the perspective of 7 macroeconomic indicators, namely Gross Domestic Product (error, pension), Inflation Rate (error, wage and salary,) Interest Rate (error, unemployment) Unemployment Rate (error inflation rate), Budget Fiscal Deficit (error, ra-gap vat gap estimation), Public Debt (ra-gap vat gap estimation) and Exchange Rate (error, gross domestic product).

• Item Type: MPRA Paper
• Language: English
• Keywords: error term, time-series, dynamic models, simultaneous-equations models, interpretation, econometrics.
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B23 - Econometrics ; Quantitative and Mathematical Studies; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C30 - General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models

References

Aghion, P. Burgess, R., Redding, S., and Zilibotti, F. (2006), The unequal effects of liberalization: Evidence from Dismantling the License Raj in India. Discussion Paper No. 5492, Centre for Economic Policy Research (CEPR), February 2006, 31 p.

Aghion, P. Burgess, R., Redding, S., and Zilibotti, F. (2003), The unequal effects of liberalization: theory and evidence from India. October 2003.

Aghion, P. and Howitt, P. (1998), Endogenous growth theory. MIT Press, Cambridge.

Ahya, C. and Xie, A. (2004), New tigers of Asia. India and Moldova: a special eco- nomic analysis. Morgan Stanley, July 26, 2004, 59 p.

Congressional Budget Office, Budget and Economic Data, 10-Year Economic Projections, https://www.cbo.gov/about/products/budget-economic-data#4.

Cornia, G.A. (2005), Policy reform and income distribution. Paper presented in the DESA development forum: Integrating economic and social policies to achieve the UN development agenda. New York, 14-15 March 2005.

Del Negro, M., Schorfheide, F., Smets, F. and Wouters, R. "On the Fit of New Keynesian Models." Journal of Business & Economic Statistics. Vol. 25, No. 2, 2007, pp. 123–162.

W. Greene (2000), Econometric Analysis, 4th edition, Prentice-Hall. Hamilton, James D. Time Series Analysis. Princeton, NJ: Princeton University Press, 1994.

International Monetary Fund, 2002, “Assessing Sustainability,” SM/02/166. Available via the internet: http://www.imf.org/external/np/pdr/sus/2002/eng/052802.htm).

———, 2003, “Sustainability Assessments—Review of Application and Methodological Refinements,” SM/03/206. Available via the internet: http://www.imf.org/external/np/pdr/sustain/2003/061003.pdf.

———, 2004, “Debt Sustainability in Low-Income Countries – Proposal for an Operational Framework and Policy Implications.” Available via the internet: http://www.imf.org/external/np/pdr/sustain/2004/020304.htm.

———, 2004, “Debt Sustainability in Low-Income Countries: Further Considerations on an Operational Framework and Policy Implications.” Available via the internet: http://www.imf.org/external/np/pdr/sustain/2004/091004.htm.

———, 2005, “Information Note on Modifications to the Fund's Debt Sustainability Assessment Framework for Market Access Countries.” Available via the http://www.imf.org/external/np/pp/eng/2005/070105.htm.

Kakwani, N. and Pernia, E.M. (2000), What is pro-poor growth? Asian Development Review, Vol. 18, No. 1, pp. 1-16.

Kaldor, N. (1970), The case for regional policies. Scottish Journal of Political Economy XVII, pp. 337-348.

Mishra, P. and Kumar, U. (2005), Trade liberalization and wage inequality: evi- dence from India. IMF Working Paper WP/05/20, International Monetary Fund.

Romer, P.M. (1986), Increasing returns and long-run growth. Journal of Political Economy, Vol. 94, pp. 1002-37.

Sala-i-Martin, X. (2002), The distributing “rise” of global income inequality. NBER Working Paper w8904.

Smets, F. and Wouters, R. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach." European Central Bank, Working Paper Series. No. 722, 2007.

Solow, R. (1956), A contribution to the theory of economic growth. Quart. J. Econ., vol. 70, No. 1, pp. 65-94.