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U.S. Budget Deficits and the European Economies: Resolving the Political Economy Puzzle

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  • Feldstein, Martin

Abstract

This paper, prepared for the annual meetings of the American Economic Association, discusses how the increases in the U.S. budget deficits since 1980 have affected the economies of Western Europe. The analysis emphasizes that U.S. deficits have not only affected these economies directly but have also induced them to adopt more restrictive monetary and fiscal policies than they would otherwise have chosen. This induced shift in domestic policies is the primary reason why European governments have pressed for a reduction in the U.S. budget deficits despite the favorable impact of those deficits on European trade surpluses.
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Suggested Citation

  • Feldstein, Martin, 1986. "U.S. Budget Deficits and the European Economies: Resolving the Political Economy Puzzle," American Economic Review, American Economic Association, vol. 76(2), pages 342-346, May.
    • Handle: RePEc:aea:aecrev:v:76:y:1986:i:2:p:342-46
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    Cited by:

    1. Jean-Paul Fitoussi & Edmund S. Phelps, 1987. "Politique économique aux Etats-Unis et croissance du chômage en Europe," Revue de l'OFCE, Programme National Persée, vol. 18(1), pages 123-147.
    2. Martin Feldstein, 1986. "New Evidence on the Effects of Exchange Rate Intervention," NBER Working Papers 2052, National Bureau of Economic Research, Inc.
    3. Karl FARMER & Birgit FRIEDL & Andreas RAINER, 2008. "Unilateral Reduction of Emission Permits, Terms of Trade, Capital Accumulation, and Welfare in a World Economy: Theoretical and Numerical Analysis," EcoMod2008 23800036, EcoMod.
    4. Karl FARMER, 2010. "Public Debt Sustainability, Exchange Rates and Country-Specific Saving Rates," EcoMod2010 259600054, EcoMod.
    5. Karl Farmer & Jacopo Zotti, 2010. "Sustainable government debt in a two-good, two-country overlapping generations model," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 57(3), pages 289-316, September.
    6. repec:spo:wpmain:info:hdl:2441/5951 is not listed on IDEAS
    7. Karl FARMER & Jacopo ZOTTI, 2009. "Sustainable Government Debt in a Two-Country, Two-Good Overlapping Generations Model," EcoMod2009 21500030, EcoMod.
    8. repec:kap:iaecre:v:17:y:2011:i:1:p:45-65 is not listed on IDEAS
    9. Martin Feldstein, 1993. "The Dollar and the Trade Deficit in the 1980s: A Personal View," NBER Working Papers 4325, National Bureau of Economic Research, Inc.
    10. Karl Farmer, 2011. "Public-Debt Sustainability, Real Exchange Rate, and Country-Specific Saving Rates," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(1), pages 45-65, February.
    11. Rachel McCulloch, 1988. "Macroeconomic Policy and Trade Performance: International Implications and U.S. Budget Deficits," NBER Chapters, in: Issues in US-EC Trade Relations, pages 349-370, National Bureau of Economic Research, Inc.
    12. Karl Farmer & Matthias Schelnast, 2013. "Public Debt Reduction in Advanced Countries and Its Impact on Emerging Countries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(2), pages 167-188, May.

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