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Budget deficits and U.S. economic growth

Author

Listed:
  • Atrayee Ghosh Roy

    (Minnesota State University, Mankato)

  • Hendrik Van den Berg

    (University of Nebraska-Lincoln)

Abstract

This paper explores how the U.S. budget deficit affects U.S. economic growth. Time-series data for the 1973-2004 period is applied to a simultaneous equation model to estimate the various direct and indirect effects of budget deficits on growth. The results indicate that, ceteris paribus, an increase in budget deficits slows growth. However, the “twin” current account deficits, which our model shows tend to accompany budget deficits, increase growth. Hence, the overall relationship between budget deficits and economic growth is ambiguous.

Suggested Citation

  • Atrayee Ghosh Roy & Hendrik Van den Berg, 2009. "Budget deficits and U.S. economic growth," Economics Bulletin, AccessEcon, vol. 29(4), pages 3015-3030.
    • Handle: RePEc:ebl:ecbull:eb-08h60001
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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I4-P290.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ranjan Kumar Mohanty, 2020. "Fiscal Deficit and Economic Growth Nexus in India: A Simultaneous Error Correction Approach," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(3), pages 683-707, September.
    2. Antonino Buscemi & Alem Hagos Yallwe, 2012. "Fiscal Deficit, National Saving and Sustainability of Economic Growth in Emerging Economies: A Dynamic GMM Panel Data Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 2(2), pages 126-140.

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    More about this item

    Keywords

    economic growth; budget deficits; stationary; simultaneity;
    All these keywords.

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • F3 - International Economics - - International Finance

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