The tax-smoothing theory suggests that deficits would respond particularly to recession, temporarily high government spending, and anticipated inflation. My empirical estimates indicate that a relation of this type is reasonably stable in the U.S. since at least 1920. In particular, the statistical evidence does not support the idea that there has been a shift toward a fiscal policy that generates either more real public debt on average or that generates larger deficits in response to recessions. Further, the deficits for 1982-83 and projections for 1984 are consistent with the previous structure. The high values of these deficits reflect the customary response to substantial recession (interacting with big government) and to expected inflation.
*Published:
Barro, Robert J. "The Behavior of U.S. Deficits." The American Business Cycle: Continuity and Change, edited by Robert J. Gordon. Chicago: UCP, 1 986, pp. 361-387 and 393-394.
Barro, Robert J. "U.S. Deficits Since World War I." Scandinavian Journal of Economics, Vol. 88, No. 1, (1986), pp. 195-222.
You may purchase this paper on-line in .pdf format
from SSRN.com ($5) for electronic delivery.
Machine-readable bibliographic record -
MARC,
RIS,
BibTeX
