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Are Adjustments in the U.S. Budget Deficit Asymmetric? Another Look at Sustainability

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  • James Payne
  • Hassan Mohammadi

Abstract

This study examines the sustainability along with the structural stability of the U.S. federal budget deficit over the post World War II period. Allowing for an endogenously determined structural break in 1982:1, tests of unit roots based on Perron's [ 1997 ] methodology suggest a stationary and sustainable budget deficit. Moreover, threshold autoregressive and momentum threshold autoregressive models do not detect asymmetries in the response of the budget deficit to deviations from its long-run trend. Copyright International Atlantic Economic Society 2006

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File URL: http://hdl.handle.net/10.1007/s11293-006-6116-8
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Bibliographic Info

Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

Volume (Year): 34 (2006)
Issue (Month): 1 (March)
Pages: 15-22

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Handle: RePEc:kap:atlecj:v:34:y:2006:i:1:p:15-22

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  1. Hakkio, Craig S & Rush, Mark, 1991. "Is the Budget Deficit "Too Large?"," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 429-45, July.
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  3. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries," European Economic Review, Elsevier, vol. 44(7), pages 1259-1289, June.
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Citations

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Cited by:
  1. Chen, Shyh-Wei, 2014. "Smooth transition, non-linearity and current account sustainability: Evidence from the European countries," Economic Modelling, Elsevier, vol. 38(C), pages 541-554.
  2. Trachanas, Emmanouil & Katrakilidis, Constantinos, 2013. "Fiscal deficits under financial pressure and insolvency: Evidence for Italy, Greece and Spain," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 730-749.
  3. Mohammadi, Hassan, 2009. "Electricity prices and fuel costs: Long-run relations and short-run dynamics," Energy Economics, Elsevier, vol. 31(3), pages 503-509, May.
  4. Chen, Shyh-Wei, 2014. "Testing for fiscal sustainability: New evidence from the G-7 and some European countries," Economic Modelling, Elsevier, vol. 37(C), pages 1-15.

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