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The Sustainability of Government Deficits: Implications of the Present-Value Borrowing Constraint

David Wilcox ()

Journal of Money, Credit and Banking, 1989, vol. 21, issue 3, 291-306

Abstract: This paper introduces a new methodology for evaluating the sustainability of fiscal policy. The new methodology is distinguished from most existing tests in two important respects: first, it allows for stochastic real interest rates; and second, it is both necessary and sufficient. Results from the application of the new test suggest that recent fiscal policy in the United States has not been sustainable. The paper contrasts its findings with those of James D. Hamilton and Marjorie A. Flavin (1986). Copyright 1989 by Ohio State University Press.

Date: 1989
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Working Paper: The substainability of government deficits: implications of the present- value borrowing constraint (1987)
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Handle: RePEc:mcb:jmoncb:v:21:y:1989:i:3:p:291-306