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Working Paper No. 358 | October 2002

Threshold Effects in the US Budget Deficit

This paper contributes to the debate on whether the United States' large federal budget deficits are sustainable in the long run. The authors model the government deficit per capita as a threshold autoregressive process, finding evidence that the deficit is sustainable in the long run and that economic policymakers will intervene to reduce the per capita deficit only when it reaches a certain threshold.

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Author(s):
Philip Arestis Andrea Cipollini Bassam Fattouh

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