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How little we know about deficit policy effects

  • Preston J. Miller
  • William Roberds

We use a simple model to show why previous empirical studies of budget policy effects are flawed. Due to an identification problem, those studies' findings can be shown to be consistent with policies either mattering or not. We argue that this problem is difficult and not likely to be resolved soon.

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Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

Volume (Year): (1992)
Issue (Month): Win ()
Pages: 2-11

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Handle: RePEc:fip:fedmqr:y:1992:i:win:p:2-11:n:v.16no.1
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  1. Miller, Preston J & Roberds, William T, 1991. "The Quantitative Significance of the Lucas Critique," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(4), pages 361-87, October.
  2. Dwyer, Gerald P, Jr, 1982. "Inflation and Government Deficits," Economic Inquiry, Western Economic Association International, vol. 20(3), pages 315-29, July.
  3. B. Douglas Bernheim & Kyle Bagwell, 1989. "Is Everything Neutral?," NBER Working Papers 2086, National Bureau of Economic Research, Inc.
  4. Andrew B. Abel & B. Douglas Bernheim, 1992. "Fiscal Policy With Impure Intergenerational Altruism," NBER Working Papers 2613, National Bureau of Economic Research, Inc.
  5. James M. Poterba & Lawrence H. Summers, 1986. "Finite Lifetimes and the Effects of Budget Deficits on National Savings," Working papers 434, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  7. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  8. Martin Feldstein, 1986. "The Budget Deficit and the Dollar," NBER Working Papers 1898, National Bureau of Economic Research, Inc.
  9. Bernheim, B Douglas, 1989. "A Neoclassical Perspective on Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 55-72, Spring.
  10. Evans, Paul, 1991. "Is Ricardian Equivalence a Good Approximation?," Economic Inquiry, Western Economic Association International, vol. 29(4), pages 626-44, October.
  11. Kormendi, Roger C, 1983. "Government Debt, Government Spending, and Private Sector Behavior," American Economic Review, American Economic Association, vol. 73(5), pages 994-1010, December.
  12. Thomas J. Sargent, 1975. "The observational equivalence of natural and unnatural rate theories of macroeconomics," Working Papers 48, Federal Reserve Bank of Minneapolis.
  13. Preston J. Miller, 1983. "Higher deficit policies lead to higher inflation," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
  14. Bruce D. Smith, 1984. "Money and inflation in colonial Massachusetts," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
  15. Plosser, Charles I., 1982. "Government financing decisions and asset returns," Journal of Monetary Economics, Elsevier, vol. 9(3), pages 325-352.
  16. Neil Wallace, 1984. "Some of the choices for monetary policy," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
  17. Plosser, Charles I., 1987. "Fiscal policy and the term structure," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 343-367, September.
  18. Neil Wallace, 1983. "A legal restrictions theory of the demand for "money" and the role of monetary policy," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
  19. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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