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Do Federal Deficits Really Matter?

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  • JAMES R. BARTH
  • GEORGE IDEN
  • FRANK S. RUSSEK

Abstract

This paper reviews competing views regarding interest rates and other economic effects of federal deficits. It discusses the findings of several empirical studies that have analyzed these relationships. The main points ofthe paper are that: (a) the con-cept of the deficit is ambiguous because not all deficits have the same economic effects, and (b) by slightly modifying existing studies, one is able to produce empirical evidence showing that deficits or debt do indeed raise interest rates and otherwise affect economic activity in ways consistent with the conven-tional view. Copyright 1984 Western Economic Association International.

Suggested Citation

  • James R. Barth & George Iden & Frank S. Russek, 1984. "Do Federal Deficits Really Matter?," Contemporary Economic Policy, Western Economic Association International, vol. 3(1), pages 79-95, September.
  • Handle: RePEc:bla:coecpo:v:3:y:1984:i:1:p:79-95
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    References listed on IDEAS

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    1. Michael R. Darby, 1984. "Some pleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr.
    2. Feldstein, Martin, 1982. "Government deficits and aggregate demand," Journal of Monetary Economics, Elsevier, vol. 9(1), pages 1-20.
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    6. Hafer, R W & Hein, Scott E, 1984. "Financial Innovations and the Interest Elasticity of Money Demand: Some Historical Evidence: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(2), pages 247-252, May.
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    8. Cohen, Darrel & McMenamin, J Stuart, 1978. "The Role of Fiscal Policy in a Financially Disaggregated Macroeconomic Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 10(3), pages 322-336, August.
    9. Barro, Robert J, 1981. "Output Effects of Government Purchases," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1086-1121, December.
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    12. Barth, James & Sickles, Robin & Wiest, Philip, 1982. "Assessing the impact of varying economic conditions on federal reserve behavior," Journal of Macroeconomics, Elsevier, vol. 4(1), pages 47-70.
    13. Levy, Mickey D., 1981. "Factors affecting monetary policy in an era of inflation," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 351-373.
    14. Feldstein, Martin S & Eckstein, Otto, 1970. "The Fundamental Determinants of the Interest Rate," The Review of Economics and Statistics, MIT Press, vol. 52(4), pages 363-375, November.
    15. Abrams, Richard K & Froyen, Richard & Waud, Roger N, 1980. "Monetary Policy Reaction Functions, Consistent Expectations, and the Burns Era," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(1), pages 30-42, February.
    16. Seater, John J., 1981. "The market value of outstanding government debt, 1919-1975," Journal of Monetary Economics, Elsevier, vol. 8(1), pages 85-101.
    17. Darrel Cohen & Peter B. Clark, 1984. "The effects of fiscal policy on the U.S. economy," Staff Studies 136, Board of Governors of the Federal Reserve System (U.S.).
    18. Blinder, Alan S. & Solow, Robert M., 1973. "Does fiscal policy matter?," Journal of Public Economics, Elsevier, vol. 2(4), pages 319-337.
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