Fiscal sustainability: a note for Cabo Verde

Mendes, Cassandro (2015): Fiscal sustainability: a note for Cabo Verde.

Abstract

The present note aims to analyze the sustainability of the fiscal policies adopted by the government of Cabo Verde in the last two decades (1990-2013). We used time series techniques to derive our results. We tested the debt sustainability under two case scenarios by using the potential cointegration between the government expenditures and revenues (revenue with or without donations from international partners). The results from our data show that the fiscal policies adopted recently can be assumed to be sustainable only in the first scenario, when foreign donations are considered. If we exclude foreign donations from the government revenues, the hypothesis of non-sustainability cannot be rejected. These results show that fiscal reforms are needed to supplant the great dependence from Donors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fiscal sustainability, intertemporal budget constraints, cointegration
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General

References

Hakkio, C. and Rush, M. (1991) Is the Budget Deficit “too large”? Economic Inquiry. Vol. 29.

Hamilton, J. and Flavin, M. (1986) On the limitations of government borrowing: a framework for empirical testing. American Economic Review. Vol. 76.

Florencia, A.; Cerro, A.; Meloni, O. and Genta, T. (2009). Fiscal Sustainability and crises. The case of Argentina. Associacion Argentina de Economia Politica.

Pasten, R. and Cover, J. (2010).The Political economy of unsustainable fiscal deficits. Cuadernos de Economia, vol. 47. Pp. 169-189.

Olekalns, N. and Cashim, P. (2000).An examination of the sustainability of Indian Fiscal Policy. International Monetary Fund/Department of Economics, The University of Melbourne: RePEc: mlb: wpaper: 748.

Mu, Y. (2013). Striking an Appropriate Balance Among Public Investment, Growth, and Debt Sustainability in Cape Verde. IMF working paper WP/12/280.