National Insolvency: A Test of the US Intertemporal Budget Constraint

Merih Uctum and Michael Wickens

No 437, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: If a nation fails to satisfy its intertemporal budget constraint (IBC) then, like a government or a household, either it will become insolvent or it can consume more of its income. The main purpose of this paper is to establish necessary and sufficient conditions for a nation to satisfy its IBC, and to use these to carry out a test of whether the United States is violating its IBC. After suitable modifications the techniques used in the literature in testing the government IBC can be used; for example, the balance of payments replaces the government budget constraint. The analysis provides a number of new results and generalizations of existing results.

Keywords: Balance of Payments; Budget Constraint; Government Spending (search for similar items in EconPapers)
JEL-codes: H61 H62 H63 (search for similar items in EconPapers)
Date: 1990-08
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Citations: View citations in EconPapers (3)

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