The substainability of government deficits: implications of the present- value borrowing constraint
AbstractThis paper introduces a new methodology for evaluating the sustainability of fiscal policy. The new methodology is distinguished from most existing tests in two important respects: first, it allows for stochastic real interest rates; and second, it is both necessary and sufficient. Results from the application of the new test suggest that recent fiscal policy in the United States has not been sustainable. The paper contrasts its findings with those of James D. Hamilton and Marjorie A. Flavin (1986). Copyright 1989 by Ohio State University Press.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Working Paper Series / Economic Activity Section with number 77.
Date of creation: 1987
Date of revision:
Other versions of this item:
- Wilcox, David W, 1989. "The Sustainability of Government Deficits: Implications of the Present-Value Borrowing Constraint," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(3), pages 291-306, August.
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