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Threshold Effects in the U.S. Budget Deficit

  • Philip Arestis
  • Andrea Cipollini
  • Bassam Fattouh

We contribute to the debate on whether the U.S. large federal budget deficits are sustainable in the long run. We model the U.S. government deficit per capita as a threshold autoregressive process. We find evidence that the U.S. budget deficit is sustainable in the long run and that economic policy makers will only intervene to reduce per capita deficit when it reaches a certain threshold. (JEL C32, E62) Copyright 2004, Oxford University Press.

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Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 42 (2004)
Issue (Month): 2 (April)
Pages: 214-222

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Handle: RePEc:oup:ecinqu:v:42:y:2004:i:2:p:214-222
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