The Sustainability of Government Deficits: Implications of the Present-Value Borrowing Constraint

1989/08/01 by David W. Wilcox, David Wilcox · 2 citations
Economics, Econometrics and Finance · #Monetary Policy and Economic Impact #Fiscal Policies and Political Economy #Fiscal Policy and Economic Growth

paper · doi:10.2307/1992415

Abstract

This paper introduces a new methodology for evaluating the sustainability of fiscal policy. The new methodology is distinguished from most existing tests in two important respects: first, it allows for stochastic real interest rates; and second, it is both necessary and sufficient. Results from the application of the new test suggest that recent fiscal policy in the United States has not been sustainable. The paper contrasts its findings with those of James D. Hamilton and Marjorie A. Flavin (1986). Copyright 1989 by Ohio State University Press.

Citations

• Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root

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