How Does the U.S. Government Finance Fiscal Shocks?

Antje Berndt, Hanno Lustig and Sevin Yeltekin ()

No 16458, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a method for identifying and quantifying the fiscal channels that help finance government spending shocks. We define fiscal shocks as surprises in defense spending and show that they are more precisely identified when defense stock data are used in addition to aggregate macroeconomic data. Our results show that in the postwar period, over 9% of the U.S. government's unanticipated spending needs were financed by a reduction in the market value of debt and more than 73% by an increase in primary surpluses. Additionally, we find that long-term debt is more effective at absorbing fiscal risk than short-term debt.

JEL-codes: E44 E62 G12 (search for similar items in EconPapers)
Date: 2010-10
Note: AP EFG ME
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as Antje Berndt & Hanno Lustig & Sevin Yeltekin, 2012. "How Does the US Government Finance Fiscal Shocks?," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(1), pages 69-104, January.

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Journal Article: How Does the US Government Finance Fiscal Shocks? (2012)
Working Paper: How does the U.S. government finance fiscal shocks?
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