Threshold Effects in the U.S. Budget Deficit

The Levy Economics Institute of Bard College Working Paper No. 358

20 Pages Posted: 19 Mar 2003

See all articles by Philip Arestis

Philip Arestis

University of Cambridge - Department of Land Economy; Universidad del País Vasco (UPV/EHU)

Andrea Cipollini

University of Palermo - d/SEAS; Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; Università degli studi di Modena e Reggio Emilia (UNIMORE) - Center for Research in Banking and Finance (CEFIN)

Bassam Fattouh

University of London - School of Oriental and African Studies (SOAS); University of London - Centre for Financial and Management Studies (CeFIMS)

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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.

Keywords: Government Deficit, Threshold, Unit Root

JEL Classification: C32, E62

Suggested Citation

Arestis, Philip and Cipollini, Andrea and Fattouh, Bassam, Threshold Effects in the U.S. Budget Deficit. The Levy Economics Institute of Bard College Working Paper No. 358. Available at SSRN: https://ssrn.com/abstract=370420 or http://dx.doi.org/10.2139/ssrn.370420

Philip Arestis (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Universidad del País Vasco (UPV/EHU)

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

Andrea Cipollini

University of Palermo - d/SEAS ( email )

Viale delle Scienze, edificio 13
Palermo, 90124
Italy

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )

Viale Berengario 51
41100 Modena, Modena 41100
Italy

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Center for Research in Banking and Finance (CEFIN) ( email )

via Berengario 51
Modena, modena I-41100
Italy

Bassam Fattouh

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom
+020 7898 4053 (Phone)
+020 7898 4089 (Fax)

University of London - Centre for Financial and Management Studies (CeFIMS)

Exhibition Road
London, WC1E 7HU
United Kingdom

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