Budget deficits and U.S. economic growth
AbstractThis 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.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 29 (2009)
Issue (Month): 4 ()
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economic growth; budget deficits; stationary; simultaneity;
Find related papers by JEL classification:
- H6 - Public Economics - - National Budget, Deficit, and Debt
- F3 - International Economics - - International Finance
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