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The Behavior of U.S. Deficits

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  • Barro, Robert J.

Abstract

The tax-smoothing theory suggests that deficits would respond particularly to recession, temporarily high government spending, and anticipated inflation. My empirical estimates indicate that a relation of this type is reasonably stable in the U.S. since at least 1920. In particular, the statistical evidence does not support the idea that there has been a shift toward a fiscal policy that generates either more real public debt on average or that generates larger deficits in response to recessions. Further, the deficits for 1982-83 and projections for 1984 are consistent with the previous structure. The high values of these deficits reflect the customary response to substantial recession (interacting with big government) and to expected inflation.
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Suggested Citation

  • Barro, Robert J., 1984. "The Behavior of U.S. Deficits," Working Papers 32, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    • Handle: RePEc:zbw:cbscwp:32
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    1. is not listed on IDEAS
    2. Huizinga, John & Mishkin, Frederic S., 1986. "Monetary policy regime shifts and the unusual behavior of real interest rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 24(1), pages 231-274, January.
    3. Ricci-Risquete, Alejandro & Ramajo, Julián & de Castro, Francisco, 2016. "Do Spanish fiscal regimes follow the euro-area trends? Evidence from Markov-Switching fiscal rules," Economic Modelling, Elsevier, vol. 59(C), pages 484-494.
    4. repec:ebl:ecbull:v:5:y:2007:i:14:p:1-9 is not listed on IDEAS

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