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State and local finances and the macroeconomy: the high-employment budget and fiscal impetus

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Author Info

  • Glenn Follette
  • Andrea Kusko
  • Byron Lutz

Abstract

We examine the interplay of the economy and state and local budgets by developing and examining two measures of fiscal policy: the high-employment budget and fiscal impetus. We find that a 1 percentage point increase in cyclical GDP results in a 0.1 percentage point increase in NIPA-based net saving through the automatic response of taxes and expenditures. State and local budget policies are found to be modestly pro-cyclical. Stimulus to aggregate demand is about 0.2 percentage point less following a business cycle peak than it is during the period before the business cycle peak.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2009-05.

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Date of creation: 2009
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Handle: RePEc:fip:fedgfe:2009-05

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Keywords: Finance; Public ; Fiscal policy;

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References

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  1. Lutz, Byron F., 2008. "The Connection Between House Price Appreciation and Property Tax Revenues," National Tax Journal, National Tax Association, vol. 61(3), pages 555-72, September.
  2. Rebecca M. Blank, 2001. "What Causes Public Assistance Caseloads to Grow?," Journal of Human Resources, University of Wisconsin Press, vol. 36(1), pages 85-118.
  3. Byron F. Lutz, 2008. "The connection between house price appreciation and property tax revenues," Finance and Economics Discussion Series 2008-48, Board of Governors of the Federal Reserve System (U.S.).
  4. Darrel Cohen & Glenn Follette, 1999. "The automatic fiscal stabilizers: quietly doing their thing," Finance and Economics Discussion Series 1999-64, Board of Governors of the Federal Reserve System (U.S.).
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Cited by:
  1. Glenn Follette & Byron Lutz, 2010. "Fiscal policy in the United States: automatic stabilizers, discretionary fiscal policy actions, and the economy," Finance and Economics Discussion Series 2010-43, Board of Governors of the Federal Reserve System (U.S.).
  2. Clemens, Jeffrey, 2013. "State Fiscal Adjustment During Times of Stress: Possible Causes of the Severity and Composition of Budget Cuts," MPRA Paper 55921, University Library of Munich, Germany.
  3. David J. Stockton, 2013. "Fiscal Policy in the United States: Still in Need of a Strategy," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 14(2), pages 09-16, 08.
  4. Jeffrey Clemens & David M. Cutler, 2013. "Who Pays for Public Employee Health Costs?," NBER Working Papers 19574, National Bureau of Economic Research, Inc.
  5. Waltraud Schelkle, 2010. "Good Governance in Crisis or a Good Crisis for Governance? A Comparison of the EU and the US," LEQS – LSE 'Europe in Question' Discussion Paper Series 16, European Institute, LSE.

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