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Title:Fiscal Taylor rules in the postwar United States PDF Logo
Authors:Reicher, Christopher Phillip
Issue Date:2009
Series/Report no.:Kiel working paper 1509
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.
Subjects:Taxation
government spending
transfer payments
fiscal policy
deficits
fiscal Taylor Rule
JEL:E62
E63
H62
H63
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
Kieler Arbeitspapiere, IfW

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