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How little we know about budget policy effects


  • Preston J. Miller
  • William Roberds


Using a simple model, we 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 either policies mattering or not.

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  • Preston J. Miller & William Roberds, 1989. "How little we know about budget policy effects," Staff Report 120, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmsr:120

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    References listed on IDEAS

    1. Abel, Andrew B & Bernheim, B Douglas, 1991. "Fiscal Policy with Impure Intergenerational Altruism," Econometrica, Econometric Society, vol. 59(6), pages 1687-1711, November.
    2. Neil Wallace, 1984. "Some of the choices for monetary policy," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
    3. Poterba, James M. & Summers, Lawrence H., 1987. "Finite lifetimes and the effects of budget deficits on national saving," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 369-391, September.
    4. 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 361-387, October.
    5. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-127, March.
    6. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    7. Bernheim, B Douglas & Bagwell, Kyle, 1988. "Is Everything Neutral?," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 308-338, April.
    8. Sargent, Thomas J, 1976. "The Observational Equivalence of Natural and Unnatural Rate Theories of Macroeconomics," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 631-640, June.
    9. Plosser, Charles I., 1982. "Government financing decisions and asset returns," Journal of Monetary Economics, Elsevier, vol. 9(3), pages 325-352.
    10. Bruce D. Smith, 1984. "Money and inflation in colonial Massachusetts," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win.
    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. Watson, Mark W., 1989. "Recursive solution methods for dynamic linear rational expectations models," Journal of Econometrics, Elsevier, vol. 41(1), pages 65-89, May.
    13. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    14. Dwyer, Gerald P, Jr, 1982. "Inflation and Government Deficits," Economic Inquiry, Western Economic Association International, vol. 20(3), pages 315-329, July.
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    Cited by:

    1. Khalid, Ahmed M., 1996. "Ricardian equivalence: Empirical evidence from developing economies," Journal of Development Economics, Elsevier, vol. 51(2), pages 413-432, December.

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