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The Behavior of U.S. Deficits

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  • Robert J. Barro

Abstract

The 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 Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1309.

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Date of creation: Mar 1984
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Publication status: published as Gordon, Robert J. (ed.) The American Business Cycle: Continuity and Change. Chicago: University of Chicago Press, 1986.
Handle: RePEc:nbr:nberwo:1309

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  1. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(1), pages 55-93.
  2. Butkiewicz, James L., 1983. "The market value of outstanding government debt : Comment," Journal of Monetary Economics, Elsevier, Elsevier, vol. 11(3), pages 373-379.
  3. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages 940-71, October.
  4. Finn Kydland & Edward C. Prescott, 1980. "A Competitive Theory of Fluctuations and the Feasibility and Desirability of Stabilization Policy," NBER Chapters, in: Rational Expectations and Economic Policy, pages 169-198 National Bureau of Economic Research, Inc.
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Cited by:
  1. John A. Tatom, 1984. "A perspective on the federal deficit problem," Review, Federal Reserve Bank of St. Louis, issue Jun, pages 5-17.
  2. John Huizinga & Frederic S. Mishkin, 1985. "Monetary Policy Regime Shifts and the Unusual Behavior of Real Interest Rates," NBER Working Papers 1678, National Bureau of Economic Research, Inc.
  3. Sahar Bahmani, 2007. "Do budget deficits follow a linear or non-linear path?," Economics Bulletin, AccessEcon, vol. 5(14), pages 1-9.
  4. Skinner, Jonathan, 1988. "The welfare cost of uncertain tax policy," Journal of Public Economics, Elsevier, Elsevier, vol. 37(2), pages 129-145, November.
  5. repec:ebl:ecbull:v:5:y:2007:i:14:p:1-9 is not listed on IDEAS

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