The Sustainability of Fiscal Policy in the United States

Henning Bohn ()

No CESifo Working Paper No. 1446, CESifo Working Paper Series from CESifo Group Munich

Abstract: The paper examines the sustainability of U.S. fiscal policy, finding substantial evidence in favor. I summarize the U.S. fiscal record from 1792-2003, critically review sustainability conditions and their testable implications, and apply them to U.S. data. I particularly emphasize the ramifications of economic growth. A “growth dividend” has historically covered the entire interest bill on the U.S. debt. Unit root tests on real series, unscaled by GDP, are distorted by the series’ severe heteroskedasticity. The most credible evidence in favor of sustainability is the robust positive response of primary surpluses to fluctuations in the debt-GDP ratio.

Keywords: public debt; sustainability; primary surplus; unit root (search for similar items in EconPapers)
JEL-codes: E60 H00 H60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-his, nep-mac and nep-pbe
Date: 2005
View citations in EconPapers

Downloads: (external link)
http://www.cesifo-group.de/DocCIDL/cesifo1_wp1446.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ces:ceswps:_1446

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich
Address: Poschingerstrasse 5, 81679 Munich
Series data maintained by Julio Saavedra ().