The behavior of U.S. States’ debts and deficits

Maria Cornachione Kula ()
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Maria Cornachione Kula: Gabelli School of Business, Roger Williams University, Bristol, USA

Public Sector Economics, 2019, vol. 43, issue 3, 267-289

Abstract: Do governments satisfy an intertemporal budget constraint? This paper uses a panel of U.S. state data from 1978-1998 to empirically investigate whether primary surpluses respond to rising debt/GDP ratios. Instead of relying solely on the time-series characteristics of various data series, the paper focuses on the response of primary surpluses when cyclical fluctuations in output and government spending are explicitly considered. Results suggest no surplus response to the accumulation of debt, whether or not cyclical fluctuations are controlled for, in contrast to similar studies done using U.S. federal government data.

Keywords: fiscal policy; fiscal sustainability; public debt; budget deficits (search for similar items in EconPapers)
JEL-codes: E62 H63 H74 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:ipf:psejou:v:43:y:2019:i:3:p:267-289

DOI: 10.3326/pse.43.3.3

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