Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259844 
Authors: 
Year of Publication: 
2001
Series/Report no.: 
Working Paper No. 2001:2
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
This paper estimates how the US budget responds to shocks in taxes, spending and output. In particular, we consider the dynamic adjustment of the two budget components (taxes and spending) to such shocks. The recently developed Generalized Impulse Response Function, which takes the historical distribution of the residuals into account, is applied. We select the 'correct' specification, estimate two VAR and two VEC models and compare the results. Our chosen specification suggests that tax, spending and output shocks generate deficits in the long run while the tax and output shocks generate a surplus in the short run. Moreover, model specification matters indeed.
Subjects: 
Generalized impulse response function
Model specification
VAR
Budget deficit
Fiscal variables
JEL: 
C32
C52
E62
Document Type: 
Working Paper

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