Following Payne and Mohammadi [2006], this note examines the sustainability of budget deficits of central and local governments for Japan over the period 1959-2003. We use the methodology of unit root test proposed by Perron [1997] which allows for an endogenous structural change in the sample data. For this purpose, we calculate critical values specific to our sample size because our sample size is very small. Payne and Mohammadi [2006] analyzed relatively large sample and obtained the sustainability of budget deficit for the U.S. However, from the results of tests for Japan, the sustainability of budget deficit is not supported even if a structural break in the budgetary process is considered. Our results are opposite of Payne and Mohammadi’s results for the U.S. In Japan, the fiscal situation of both central and local government has deteriorated rapidly in the 1990’s, and the fiscal sustainability is suspected in recent years. The results of this study suggest an important evidence for the issue of sustainability.(JEL H62)
展开▼
