State and local finances and the macroeconomy: the high-employment budget and fiscal impetus
AbstractWe 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 InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2009-05.
Date of creation: 2009
Date of revision:
Other versions of this item:
- Follette, Glenn & Kusko, Andrea & Lutz, Byron, 2008. "State and Local Finances and the Macroeconomy: The High–Employment Budget and Fiscal Impetus," National Tax Journal, National Tax Association, vol. 61(3), pages 531-45, September.
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