The Behavior of U.S. Deficits
AbstractThe tax-smoothing theory suggests that deficits would respond particularly to recession, temporarily high government spending, and anticipated inflation. My empirical estimates indicate that a relation of this type is reasonably stable in the U.S. since at least 1920. In particular, the statistical evidence does not support the idea that there has been a shift toward a fiscal policy that generates either more real public debt on average or that generates larger deficits in response to recessions. Further, the deficits for 1982-83 and projections for 1984 are consistent with the previous structure. The high values of these deficits reflect the customary response to substantial recession (interacting with big government) and to expected inflation.
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Bibliographic InfoPaper provided by Chicago - Center for Study of Economy and State in its series University of Chicago - George G. Stigler Center for Study of Economy and State with number 32.
Date of creation: 1984
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