Threshold Effects in the U.S. Budget Deficit

Philip Arestis, Andrea Cipollini and Bassam Fattouh

Economics Working Paper Archive from Levy Economics Institute

Abstract: We contribute to the debate on whether the large U.S. federal budget deficits are sustainable in the long run. We model the U.S. government deficit per capita as a threshold autoregressive process. We find evidence that the U.S. budget deficit is sustainable in the long run and that economic policymakers will intervene to reduce per capita deficit only when it reaches a certain threshold.

Date: 2002-10
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Journal Article: Threshold Effects in the U.S. Budget Deficit (2004)
Working Paper: Threshold Effects in the US Budget Deficit (2003)
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