Abstract
We suggest using the efficient test with prespecified cointegration vectors of Horvath and Watson (19954. Horvath , M. and Watson , M. 1995 . Testing for cointegration when some of the cointegrating vectors are prespecified . Econometric Theory , 11 : 984 – 1014 . [CrossRef], [Web of Science ®] View all references) for the ‘strong’ fiscal sustainability hypothesis. Unlike this procedure, conventional methodologies tend to penalize the sustainability hypothesis.