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State Rainy Day Funds and Fiscal Crises: Rainy Day Funds and the 1990–1991 Recession Revisited
Author(s) -
Douglas James W.,
Gaddie Ronald Keith
Publication year - 2002
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/1540-5850.00063
Subject(s) - recession , state (computer science) , economics , fiscal year , finance , macroeconomics , mathematics , algorithm
The recession of the early 1980s prompted many states to establish budget stabilization (rainy day) funds. Initial examinations of rainy day funds find a limited impact by the funds in alleviating fiscal stress. In this article, we propose an enhanced model of rainy day fund impact. Using data from 48 states for the 1990–1991 recession, our analysis indicates that the presence of a number of structural factors and the maintenance of generally large balances in other funds entering recession helps to alleviate fiscal stress when a state’s economy is in recession.