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Author Reicher, Christopher Phillip
Source EconStor
Content type Text
Publisher Kiel Institute for the World Economy (IfW)
File Format PDF
Language English
Subject Domain (in DDC) Social sciences ♦ Economics
Subject Keyword Taxation ♦ government spending ♦ transfer payments ♦ fiscal policy ♦ deficits ♦ fiscal Taylor Rule ♦ Finanzpolitik ♦ Taylor-Regel ♦ Haushaltsdefizit ♦ Haushaltskonsolidierung ♦ Sozialtransfer ♦ USA ♦ Fiscal Policy ♦ Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ♦ National Deficit; Surplus ♦ National Debt; Debt Management; Sovereign Debt
Abstract Recent research and events have brought fiscal policy back into the spotlight. Fiscal Taylor rules and error correction models have represented two different ways of quantifying the feedbacks from fiscal and economic conditions to fiscal policy decisions. This paper synthesizes these two ideas, estimating a fiscal Taylor rule as a special case of an error correction model. Using quarterly postwar U.S. data, estimates of a fiscal Taylor rule find that the government sector has sought to stabilize its debt through adjustments to purchases and taxes, in that order, with very little stabilization coming through adjustments to transfer payments. Since 1981, the debt-stabilization motive has almost vanished, while the cyclical behavior of fiscal variables has not changed. This provides indirect evidence that fiscal policy may have become "non-Ricardian" in the US during recent decades.
Part of series Kiel Working Paper x1509
Learning Resource Type Article
Publisher Date 2009-01-01
Publisher Place Kiel
Rights Holder http://www.econstor.eu/dspace/Nutzungsbedingungen