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National Debt and Its Effects on Several Other Variables: An Econometric Study of the United States

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  • Augustine C. Arize
  • Ioannis N. Kallianotis
  • Scott Liu
  • John Malindretos
  • Alex Panayides

Abstract

This paper uses a neoclassical open economy general equilibrium model to determine the effects of the budget deficit and national debt on some key domestic variables while examining the interdependence and repercussion effects between the U.S. economy and the rest of the world. The empirical results show that the budget deficit has a significant effect on both prices and the current account and that the international debt has a similar effect on consumption and saving. Foreign interest rate and foreign real income affect almost every variable in the United States. In the long run, the deficits might have negative effects on the U.S. economy and redistribution effects between generations.

Suggested Citation

  • Augustine C. Arize & Ioannis N. Kallianotis & Scott Liu & John Malindretos & Alex Panayides, 2014. "National Debt and Its Effects on Several Other Variables: An Econometric Study of the United States," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(4), pages 98-113, October.
    • Handle: RePEc:jfr:ijfr11:v:5:y:2014:i:4:p:98-113
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    Cited by:

    1. Ioannis N. Kallianiotis, 2015. "The Optimal Taxation and the Current Tax System," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(3), pages 151-164, March.

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