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

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

Author Info

Glenn Follette
Andrea Kusko
Byron Lutz

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Glenn Reith Follette

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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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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Related research
Keywords: Finance; Public ; Fiscal policy;

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This paper has been announced in the following NEP Reports:

NEP-ALL-2009-02-07 (All new papers)
NEP-MAC-2009-02-07 (Macroeconomics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Darrel Cohen & Glenn Follette, 2000. "The automatic fiscal stabilizers: quietly doing their thing," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 35-67. [Downloadable!]
Other versions:
- 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.). [Downloadable!]
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.). [Downloadable!]

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This page was last updated on 2009-12-15.

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