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Threshold Effects in the U.S. Budget Deficit

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  • Philip Arestis
  • Andrea Cipollini
  • Bassam Fattouh

Abstract

We contribute to the debate on whether the large U.S. 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 policymakers will intervene to reduce per capita deficit only when it reaches a certain threshold.

Suggested Citation

  • Philip Arestis & Andrea Cipollini & Bassam Fattouh, 2002. "Threshold Effects in the U.S. Budget Deficit," Economics Working Paper Archive wp_358, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_358
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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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