Economic Effects of Sustained Budget Deficits

Abstract

The effects of fiscal policy on the economy have received substantial attention in academic and policy circles. We review this literature in light of recent policy debates and new research and obtain three results. First, other things equal, deficits reduce national saving and future national income, even if international capital inflows avert an increase in interest rates. Second, the recent fiscal deterioration implies significant declines in future national income. Third, studies incorporating the best available information about expected future deficits tend to find significant effects of expected deficits on current long—term bond yields, controlling for other factors.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 215 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.