A wavelet analysis of US fiscal sustainability

Iolanda Lo Cascio

Economic Modelling, 2015, vol. 51, issue C, 33-37

Abstract: In this paper, we reassess the relationship between primary deficit and lagged debt to GDP ratio (Bohn, 1998), to test for US debt sustainability over the period 1795–2012. Our analysis is rooted in the wavelet domain enabling the detection of interesting patterns and otherwise hidden information. We find evidence of long term fiscal sustainability but only up until 1995 and also we show that governments tend to respond more vigorously to budget deficits when the level of debt is high rather than low.

Keywords: Wavelet coherence; Public debt sustainability; Time–frequency decomposition (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:51:y:2015:i:c:p:33-37

DOI: 10.1016/j.econmod.2015.07.008

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