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An Estimated Fiscal Taylor Rule for the Postwar United States

  • Christopher Reicher

This paper documents the systematic response of postwar U.S. fiscal policy to fiscal imbalances and the business cycle using a multivariate Fiscal Taylor Rule. Adjustments to taxes and purchases both account for a large portion of the fiscal response to debt, while authorities seem reluctant to adjust transfers. As expected, taxes are highly procyclical; purchases are acyclical; and transfers are countercyclical. Neither pattern has changed much over time, except that adjustment happens more slowly after 1981 than before 1980. The role of adjustments to purchases in stabilizing the debt indicates that the recent discussion about spending reversals is highly relevant

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File URL: https://www.ifw-members.ifw-kiel.de/publications/an-estimated-fiscal-taylor-rule-for-the-postwar-united-states/an-estimated-fiscal-taylor-rule-for-the-postwar-united-states
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1705.

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Length: 7 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:kie:kieliw:1705
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  1. Alan Auerbach, 2002. "Is There a Role for Discretionary Fiscal Policy?," NBER Working Papers 9306, National Bureau of Economic Research, Inc.
  2. Bohn, H., 1991. "Budget Balance Through Revenue or Spending Adjustments? Some Historical Evidence for the United States," Weiss Center Working Papers 3-91, Wharton School - Weiss Center for International Financial Research.
  3. Giancarlo Corsetti & Keith Kuester & André Meier & Gernot J. Müller, 2010. "Debt Consolidation and Fiscal Stabilization of Deep Recessions," American Economic Review, American Economic Association, vol. 100(2), pages 41-45, May.
  4. Bohn, Henning, 1992. "Endogenous Government Spending and Ricardian Equivalence," Economic Journal, Royal Economic Society, vol. 102(412), pages 588-97, May.
  5. Henning Bohn, . "Budget Balance Through Revenue or Spending Adjustments ? Some Historical Evidence for the United States (Reprint 013)," Rodney L. White Center for Financial Research Working Papers 03-91, Wharton School Rodney L. White Center for Financial Research.
  6. Jordi Gali & Roberto Perotti, 2003. "Fiscal Policy and Monetary Integration in Europe," NBER Working Papers 9773, National Bureau of Economic Research, Inc.
  7. Corsetti, Giancarlo & Meier, André & Müller, Gernot, 2009. "Fiscal Stimulus with spending reversals," CEPR Discussion Papers 7302, C.E.P.R. Discussion Papers.
  8. John B. Taylor, 2000. "Reassessing Discretionary Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 21-36, Summer.
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