US deficit sustainability: a new approach based on multiple endogenous breaks

By Gael M. Martin. 2000

169 citations recorded by the source corpus.

Recent empirical work has questioned the consistency of US fiscal policy with an intertemporal budget constraint. Empirical results have tended to indicate that the deficit process has undergone at least one structural shift during recent decades, with the deficit becoming either unsustainable or sustainable in only a weak sense in the post-shift period. In this paper, we re-examine sustainability using a new approach, based on a cointegration model with multiple endogenous breaks. A Bayesian methodology is applied, incorporating Markov chain Monte Carlo simulators. In contrast to previous analyses, we find evidence of a sustainable deficit process over the 1947-1992 period, despite the occurrence of breaks during the 1970s and 1980s. Copyright © 2000 John Wiley & Sons, Ltd.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/a0de5eb45b81023c7851d1bba7523f273273853c

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In Economics and Econometrics

1. A. Z. Baharumshah
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Citations in the corpus

• On the sustainability of current account deficits: evidence from four ASEAN countries (2003, background): “See for example, Hamilton and Flavin (1986), Trehan and Walsh (1991), Makrydakis et al. (1999), Martin (2000) and Green et al. (2001).”
• Bayesian Inference of General Linear Restrictions on the Cointegration Space (2007, unknown): “…analyses of restrictions on the cointegration vectors include Strachan (2003), where an extension of the embedding approach of Kleibergen and Paap (2002) and Kleibergen and van Dijk (1998) is used, and Martin (2000) and Martin and Martin (2000) where restrictions in bivariate systems are analyzed.”
• ASSESSING RICARDIAN EQUIVALENCE (2003, methodology): “Martin (2000) applies an integrated cointegration=structural methodology, allowing for multiple shifts in both level and slope parameters.”