The asymmetric behavior of the U.S. public debt

Luiz Lima () and Raquel Menezes Bezerra Sampaio

No 593, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: In this paper we re-analyze the question of the U.S. public debt sustainability by using a quantile autoregression model. This modeling allows for testing whether the behavior of U.S. public debt is asymmetric or not. Our results provide evidence of a band of sustainability. Outside this band, the U.S. public debt is unsustainable. We also find fiscal policy to be adequate in the sense that occasional episodes in which the public debt moves out of the band do not pose a threat to long run sustainability.

Date: 2005-07-01
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