Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18810
Authors: 
Bohn, Henning
Year of Publication: 
2005
Series/Report no.: 
CESifo Working Paper 1446
Abstract: 
The paper examines the sustainability of U.S. fiscal policy, finding substantial evidence in favor. I summarize the U.S. fiscal record from 1792-2003, critically review sustainability conditions and their testable implications, and apply them to U.S. data. I particularly emphasize the ramifications of economic growth. A ?growth dividend? has historically covered the entire interest bill on the U.S. debt. Unit root tests on real series, unscaled by GDP, are distorted by the series? severe heteroskedasticity. The most credible evidence in favor of sustainability is the robust positive response of primary surpluses to fluctuations in the debt-GDP ratio.
Subjects: 
public debt
sustainability
primary surplus
unit root
JEL: 
H0
H6
E6
Document Type: 
Working Paper

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