Work

How Does The US Government Finance Fiscal Shocks?

Year: 2012

Type: article

Abstract: We develop a method for identifying and quantifying the fiscal channels that help finance government spending shocks. We define fiscal shocks as surprises in defense spending and show that they are more precisely identified when defense stock data are used in addition to aggregate macroeconomic data. Our results show that in the postwar period, about 9 percent of the US government's unanticipated spending needs were financed by a reduction in the market value of debt and more than 70 percent by an increase in primary surpluses. Additionally, we find that long-term debt is more effective at absorbing fiscal risk than short-term debt. (JEL E62, H56, and H63)

Source: American Economic Journal Macroeconomics

DOI: 10.1257/mac.4.1.69

Authors: Antje Berndt, Hanno Lustig, Şevin Yeltekin

Institutions: Carnegie Mellon University, University of California, Los Angeles

Language: English

Topic: Fiscal Policies and Political Economy

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2889900622

FWCI: 4.162

Cites: 43

Cited by: 51

Related to: 10