Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/45865 
Year of Publication: 
2011
Series/Report no.: 
Kiel Working Paper No. 1705
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
This paper documents the systematic response of postwar U.S. fiscal policy to fiscal imbalances and the business cycle using a multivariate Fiscal Taylor Rule. Adjustments to taxes and purchases both account for a large portion of the fiscal response to debt, while authorities seem reluctant to adjust transfers. As expected, taxes are highly procyclical; purchases are acyclical; and transfers are countercyclical. Neither pattern has changed much over time, except that adjustment happens more slowly after 1981 than before 1980. The role of adjustments to purchases in stabilizing the debt indicates that the recent discussion about spending reversals is highly relevant.
Subjects: 
Spending reversals
Fiscal Taylor Rule
deficits
fiscal policy
taxes
spending
transfer payments
JEL: 
E62
E63
H20
H62
Document Type: 
Working Paper

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