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Are Adjustments in the U.S. Budget Deficit Asymmetric? Another Look at Sustainability

  • James Payne
  • Hassan Mohammadi

This study examines the sustainability along with the structural stability of the U.S. federal budget deficit over the post World War II period. Allowing for an endogenously determined structural break in 1982:1, tests of unit roots based on Perron's [ 1997 ] methodology suggest a stationary and sustainable budget deficit. Moreover, threshold autoregressive and momentum threshold autoregressive models do not detect asymmetries in the response of the budget deficit to deviations from its long-run trend. Copyright International Atlantic Economic Society 2006

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File URL: http://hdl.handle.net/10.1007/s11293-006-6116-8
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Article provided by International Atlantic Economic Society in its journal Atlantic Economic Journal.

Volume (Year): 34 (2006)
Issue (Month): 1 (March)
Pages: 15-22

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Handle: RePEc:kap:atlecj:v:34:y:2006:i:1:p:15-22
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  1. Bharat Trehan & Carl E. Walsh, 1987. "Common trends, the government's budget constraint, and revenue smoothing," Working Papers in Applied Economic Theory 87-11, Federal Reserve Bank of San Francisco.
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  4. Oscar Bajo-Rubio & Carmen Díaz-Roldán & Vicente Esteve, 2003. "Searching for Threshold Effects in the Evolution of Budget Deficits: An Application to the Spanish Case," Economic Working Papers at Centro de Estudios Andaluces E2003/29, Centro de Estudios Andaluces.
  5. David W. Wilcox, 1987. "The substainability of government deficits: implications of the present- value borrowing constraint," Working Paper Series / Economic Activity Section 77, Board of Governors of the Federal Reserve System (U.S.).
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  7. Hakkio, Craig S & Rush, Mark, 1991. "Is the Budget Deficit "Too Large?"," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 429-45, July.
  8. James Payne, 1997. "International evidence on the sustainability of budget deficits," Applied Economics Letters, Taylor & Francis Journals, vol. 4(12), pages 775-779.
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  12. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries," CEPR Discussion Papers 2374, C.E.P.R. Discussion Papers.
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  15. Sichel, D.E., 1988. "Business Cycle Asymmetry: A Deeper Look," Papers 85, Princeton, Department of Economics - Financial Research Center.
  16. Kremers, Jeroen J. M., 1989. "U.S. Federal indebtedness and the conduct of fiscal policy," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 219-238, March.
  17. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-11, July.
  18. Haug, Alfred A, 1991. "Cointegration and Government Borrowing Constraints: Evidence for the United States," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(1), pages 97-101, January.
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  21. Bradley T. Ewing & James E. Payne & Mark A. Thompson & Omar M. Al-Zoubi, 2006. "Government Expenditures and Revenues: Evidence from Asymmetric Modeling," Southern Economic Journal, Southern Economic Association, vol. 73(1), pages 190–200, July.
  22. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-76, April.
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