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The Behavior of U. S. Public Debt and Deficits

Listed author(s):
  • Henning Bohn
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    How do governments react to the accumulation of debt? Do they take corrective measures, or do they let the debt grow? Whereas standard time series tests cannot reject a unit root in the U. S. debt-GDP ratio, this paper provides evidence of corrective action: the U. S. primary surplus is an increasing function of the debt-GDP ratio. The debt-GDP ratio displays mean-reversion if one controls for war-time spending and for cyclical fluctuations. The positive response of the primary surplus to changes in debt also shows that U. S. fiscal policy is satisfying an intertemporal budget constraint.

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    File URL: http://hdl.handle.net/10.1162/003355398555793
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    Article provided by Oxford University Press in its journal The Quarterly Journal of Economics.

    Volume (Year): 113 (1998)
    Issue (Month): 3 ()
    Pages: 949-963

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    Handle: RePEc:oup:qjecon:v:113:y:1998:i:3:p:949-963.
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