U.S. budget deficit sustainability revisited long run, persistence, and common trend José Carlos Vides, Antonio A. Golpe, Jesús Iglesias
By: Vides, José Carlos
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Contributor(s): Golpe, Antonio A | Iglesias Garrido, Jesús.
Material type: 
ArticlePublisher: 2020Subject(s): POLITICA FISCAL | DEFICIT PUBLICO | SOSTENIBILIDAD FISCAL | DESARROLLO ECONOMICO | ESTADOS UNIDOSOnline resources: Click here to access online
In:
FinanzArchiv v. 76, n. 4, December 2020, p. 370-395Summary: The U.S. budget deficit is examined on the basis of the intertemporal budget constraint (IBC) by applying a fractional cointegration approach. Thus, the main contribution of this paper is the elaboration of new conditions, depending on the persistence of the error term, for the degree of fiscal sustainability, which allow the investigation of different sizes of the budget deficit; this is a new empirical approach in the literature. Furthermore, although a unitary long-run relationship between income and expenses is interpreted under the IBC as strong sustainability, the fractional cointegration prism checks the duration of shocks that might affect in different ways the controllability of the fiscal policy. Additionally, we have found that expenditures and revenues are permanent components in the common trend, i.e., both variables are basic in the design of the U.S. budget.
| Item type | Current location | Home library | Call number | Status | Date due | Barcode |
|---|---|---|---|---|---|---|
| Artículos | IEF | IEF | OP 207/2020/4-3 (Browse shelf) | Available | OP 207/2020/4-3 |
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The U.S. budget deficit is examined on the basis of the intertemporal budget constraint (IBC) by applying a fractional cointegration approach. Thus, the main contribution of this paper is the elaboration of new conditions, depending on the persistence of the error term, for the degree of fiscal sustainability, which allow the investigation of different sizes of the budget deficit; this is a new empirical approach in the literature. Furthermore, although a unitary long-run relationship between income and expenses is interpreted under the IBC as strong sustainability, the fractional cointegration prism checks the duration of shocks that might affect in different ways the controllability of the fiscal policy. Additionally, we have found that expenditures and revenues are permanent components in the common trend, i.e., both variables are basic in the design of the U.S. budget.
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