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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 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.

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Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_358.

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Date of creation: Oct 2002
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Handle: RePEc:lev:wrkpap:wp_358
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  17. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
  18. Haug, Alfred A, 1995. "Has Federal Budget Deficit Policy Changed in Recent Years?," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 104-18, January.
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