(1) Center for Empirical Macroeconomics, Department of Business Administration and Economics, Bielefeld University, P.O. Box 100131, 33501 Bielefeld, Germany;(2) New School University, 65 Fifth Avenue, New York, NY 10003, USA
Abstract:
In this paper we test whether German public debt has been sustainable by testing how the primary surplus to GDP ratio reacts to the debt to GDP ratio. We apply semi-parametric regressions with time depending coefficients. This test shows that the mean of the coefficient relevant for sustainability is significantly positive over the time period considered. However, there is a negative trend in that coefficient which seems to have ceased to decline only in the middle to late 1990s.