Fiscal Deficit Sustainability of the Spanish Regions

Abstract

Carrion-i-Silvestre J. L. Fiscal deficit sustainability of the Spanish regions, Regional Studies. The fiscal deficit of the Spanish Autonomous Communities is investigated using non-stationary panel data analysis. The paper considers the two main approaches in the literature, first assessing whether there is a long-run relationship between the revenues and expenditures of the Autonomous Communities, and second focusing on the use of fiscal rules. The paper shows that it is possible to relate these approaches in a unified framework.

Carrion-i-Silvestre J. L. 西班牙各区域的财政赤字可持续性，区域研究。本文运用非恆定面板数据分析，探讨西班牙自治区的财政赤字。本文考量文献中的两大主要取径，第一是评价自治区中，税收与支出之间是否存在长期的关係，第二则是聚焦财政规范的使用。本文显示，的确有可能在一个统一的架构中连结此两类取径。

Carrion-i-Silvestre J. L. La viabilité du déficit budgétaire des régions espagnoles, Regional Studies. Une analyse de données de panel non stationnaires permet d'examiner le déficit budgétaire des Communautés autonomes espagnoles. L'article considère les deux principales approches dans la documentation, primo évaluer si, oui ou non, il existe un rapport à long terme entre les revenus et les dépenses des Communautés autonomes, et secundo mettre l'accent sur l'utilisation de règles budgétaires. L'article montre qu'il est possible de relier ces approches dans un cadre unifié.

Carrion-i-Silvestre J. L. Nachhaltigkeit des Haushaltsdefizits der spanischen Regionen, Regional Studies. Mithilfe einer nichtstationären Paneldatenanalyse wird das Haushaltsdefizit der spanischen autonomen Regionen untersucht. Im Beitrag werden die beiden Hauptansätze der Literatur erörtert, wobei zunächst untersucht wird, ob es eine langfristige Beziehung zwischen den Einnahmen und Ausgaben der autonomen Regionen gibt, und anschließend die Verwendung von haushaltspolitischen Vorschriften analysiert wird. Der Beitrag zeigt, dass sich diese Ansätze in einem gemeinsamen Rahmen miteinander in Beziehung setzen lassen.

Carrion-i-Silvestre J. L. Sostenibilidad del déficit fiscal de las regiones españolas, Regional Studies. Mediante un análisis de datos de panel no estacionarios, se estudia el déficit fiscal de las comunidades autónomas españolas. En este artículo se consideran los dos principales enfoques en la bibliografía: primero se analiza si existe una relación a largo plazo entre los ingresos y los gastos de las comunidades autónomas, y después se estudia el uso de las normas fiscales. En el artículo se muestra que es posible relacionar estos enfoques con una estructura unificada.

• Fiscal deficit
• Fiscal rules
• Panel data
• Cross-section dependence
• Common factors

• 财政赤字
• 财政规范
• 面板数据
• 跨部门依赖
• 共同因素

• Déficit budgétaire
• Règles budgétaires
• Données de panel
• Dépendance transversale
• Facteurs communs

• Haushaltsdefizit
• Haushaltspolitische Vorschriften
• Paneldaten
• Querschnittsdependenz
• Gemeinsame Faktoren

• Déficit fiscal
• Normas fiscales
• Datos de panel
• Dependencia transversal
• Factores comunes

JEL classifications:

• C12
• C22
• E62
• H62

Disclosure statement

No potential conflict of interest was reported by the author.

Supplemental data

Supplemental data for this article can be accessed at http://10.1080/00343404.2015.1051017

Notes

1. The territorial organization of the Spanish ACs was implemented in 1984, so there is no previous information concerning this level of government.

2. The variables could be expressed in nominal terms or as a ratio of real GDP. If the variables are in nominal terms, $i_t$ is the nominal interest rate. If the variables are expressed in real terms, $i_t$ is the real interest rate. Finally, if the variables are expressed as a ratio of GDP, $1+i_t$ would be the interest rate adjusted by the growth rate of the economy.

3. In fact, Bohn (1998) defines the primary surplus and debt at the beginning of the period divided by the GDP of the economy. This transformation has no influence on the interpretation of his model, so to be consistent with the definition of the variables used so far, this paper uses variables in levels. As for the other explanatory variables ($Z_t$), Bohn uses the variables GVAR and YVAR given in Barro (1986), which aim to capture temporary government spending and the cyclical variations of the output of the economy, respectively.

4. One might consider removing the two Spanish AC foral regions that have a funding system different from the other ACs, giving them greater autonomy in their decisions regarding raising and spending funds. However, these ACs also face the same conditions as the other ACs when assessing whether or not their fiscal policy is sustainable and it was thus decided to keep them in the sample.

5. As noted by Bai and Ng (2010), the proposals in Moon and Perron (2004) and Pesaran (2007) control the presence of cross-sectional dependence allowing for common factors, although the common factors and idiosyncratic shocks are restricted to have the same order of integration. Therefore, it is not possible to cover situations in which one component (e.g. the common factors) is I(0) and the other component (e.g., the idiosyncratic shocks) is I(1), and vice versa. In practical terms, it transpires that the test statistics in Moon and Perron (2004) and Pesaran (2007) are statistical procedures that provide statistical inference only on the idiosyncratic shocks, where the dynamics of both the idiosyncratic and the common components are restricted to be the same.

6. The use of the different information criteria in Bai and Ng (2002) always leads to the selection of the maximum number of common factors that are specified.

7. As above, the use of different information criteria to estimate the number of common factors always leads to choosing the maximum number of common factors specified.

8. There are some important features that are common to and distinguish these proposals. First, one important difference concerns the order of integration of the common factors as Westerlund (2008) considers that all common factors are I(0) stationary, whereas the other approaches assume that there might be a combination of I(0) and I(1), as in Bai and Ng (2004). Second, Bai and Carrion-i-Silvestre (2013) consider the most general case, in which the common factors might both affect the dependent variable and the stochastic regressors, whereas the other proposals assume that the common factors and the stochastic regressors are orthogonal. Finally, in Banerjee and Carrion-i-Silvestre (2011), the effect of the unobserved common factors is taken into account, as in Pesaran (2006) who uses cross-sectional averages to proxy the common factors. The other proposals estimate the common factors using principal components, as in Bai and Ng (2004).

9. The total number of common factors is denoted by $r$. The number of I(1) non-stationary common factors is denoted by $r_1$, whereas the number of I(0) stationary common factors is $r_0$, so that $r=r_0+r_1$.

10. Given the efficiency property of these estimators, a statistical inference on the estimated parameters can be performed – at the limit, the estimated parameters are distributed according to a normal distribution.

11. These authors show that in panel co-integration, the pooled CCE estimator is a consistent estimator of the co-integration vector, which is asymptotically distributed as a normal distribution. There is an important feature that distinguishes both proposals. Thus, whereas Kapetanios et al. (2011) assume that the stochastic regressors are weakly exogenous, Bai et al. (2009) specify a more general framework in which the stochastic regressors might be endogenous.

12. As mentioned above, ${\rho }_i\le 0$ indicates the prevalence of a fiscal dominance regime.

Additional information

Funding

The author acknowledges the financial support from the IEA2011 grant from the Institut d'Estudis Autonòmics, Department of Institutional Relations and Participation of the Generalitat de Catalunya, and from the Spanish Ministerio de Ciencia e Innovación [grant number ECO2014-58991-C3-1-R].