How Does the U.S. Government Finance Fiscal Shocks? / Antje Berndt, Hanno Lustig, Sevin Yeltekin.

Format:

Book

Author/Creator:

Berndt, Antje.

Contributor:

National Bureau of Economic Research.

Lustig, Hanno.

Yeltekin, Sevin.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16458.

NBER working paper series no. w16458

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

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, over 9% of the U.S. government's unanticipated spending needs were financed by a reduction in the market value of debt and more than 73% by an increase in primary surpluses. Additionally, we find that long-term debt is more effective at absorbing fiscal risk than short-term debt.

Notes:

Print version record

October 2010.