Regime-Shifts, Multicointegration and Fiscal Sustainability: Further Evidence on Poland (1999-2015)

This paper reassesses the sustainability of fiscal policy in Poland, extending the analysis of Tronzano (forthcoming) to a multicointegration test allowing for regime shifts. The empirical evidence strongly rejects the existence of multicointegration, thus suggesting that Poland’s fiscal process is unsustainable in a stochastic environment. In line with my previous research and other recent applied literature on Poland, the main policy implications are twofold. First, a prosecution of the ongoing fiscal consolidation process is needed. Second, the above process should be implemented introducing a systematic response of fiscal policy to contingent disequilibria in public debt.