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SEVERITY OF ECONOMIC FLUCTUATIONS UNDER A BALANCED BUDGET AMENDMENT
Author(s) -
WEISE CHARLES L.
Publication year - 1996
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.1996.tb00611.x
Subject(s) - recession , economics , vector autoregression , monetary economics , fiscal policy , balanced budget , macroeconomics , monetary policy , federal budget , econometrics , finance , fiscal year , politics , political science , law
This paper uses a vector autoregression model to estimate the role of fiscal and monetary policy stabilizers during the last four U.S. recessions. The data show that both types of stabilizers have had a large stabilizing effect. These results imply that adopting a balanced budget rule would increase greatly the severity of future recessions and require the Federal Reserve to respond much more strongly to economic fluctuations than is currently the case.