U.S. Federal Deficits and Debt Service

30 Pages Posted: 15 Feb 2006

See all articles by Jeroen Kremers

Jeroen Kremers

affiliation not provided to SSRN

Date Written: April 17, 1987


This study of regular patterns of the U.S. Federal debt concludes that recent Federal deficits were abnormally large by historical standards. During most of the post-war period, fluctuations of the real debt reflected the following three factors: cyclical fluctuations of real GNP; transitory Federal spending; and a regular feedback to stabilize the interest cost of Federal debt relative to GNP. Feedback to contain debt-related disequilibrium is an important ingredient of sustainable budgetary policy, and forms the focal point of this paper. It appears that the regular feedback of the post-war period ceased to be operative in recent years, as historically very large real interest payments failed to lead to deficit reductions consistent with the pattern of previous decades. The empirical analysis leading to this assessment follows two complementary approaches: co-integration and dynamic modeling.

JEL Classification: 3216

Suggested Citation

Kremers, Jeroen, U.S. Federal Deficits and Debt Service (April 17, 1987). Available at SSRN: https://ssrn.com/abstract=884680 or http://dx.doi.org/10.2139/ssrn.884680

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