Tuesday, January 17, 2012

Budget Skeletons in the Closet Not a Figment of Imagination

This has always been my impression, so it's nice to see that the question was finally tackled academically. According to research by Campos, Jaimovich & Panizza:
In Campos et al (2006), we move beyond anecdotal evidence and use data for 117 countries over a period of 30 years (1972–2003) to show that in the average country-year, debt grows 3 percentage points of GDP faster than what is implied by the budget deficit (this value is obtained after dropping outliers; if outliers are included in the sample, the average unexplained change in debt reaches 5% of GDP.

No comments: