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Threshold Effects in the US Budget Deficit

Author

Listed:
  • Philip Arestis

    (University of Cambridge - Department of Land Economy)

  • Andrea Cipollini

    (Queen Mary, University of London - Department of Economics)

  • Bassam Fattouh

    (University of London - School of Oriental and African Studies (SOAS))

Abstract

We contribute to the debate on whether the US large federal budget deficits are sustainable in the long run. We model the US government deficit per capita as a threshold autoregressive process. We find evidence that the US budget deficit is sustainable in the long run and that economic policymakers will only intervene to reduce per capita deficit when it reaches a certain threshold.

Suggested Citation

  • Philip Arestis & Andrea Cipollini & Bassam Fattouh, 2003. "Threshold Effects in the US Budget Deficit," CEIS Research Paper 18, Tor Vergata University, CEIS.
    • Handle: RePEc:rtv:ceisrp:18
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    References listed on IDEAS

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    More about this item

    Keywords

    Government Deficit; Threshold; Unit Root;
    All these keywords.

    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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