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Severity Of Economic Fluctuations Under A Balanced Budget Amendment

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  • CHARLES L. WEISE

Abstract

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.

Suggested Citation

  • Charles L. Weise, 1996. "Severity Of Economic Fluctuations Under A Balanced Budget Amendment," Contemporary Economic Policy, Western Economic Association International, vol. 14(2), pages 26-40, April.
    • Handle: RePEc:bla:coecpo:v:14:y:1996:i:2:p:26-40
    DOI: 10.1111/j.1465-7287.1996.tb00611.x
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    References listed on IDEAS

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    1. Runkle, David E, 1987. "Vector Autoregressions and Reality," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 437-442, October.
    2. Runkle, David E, 1987. "Vector Autoregressions and Reality: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 454-454, October.
    3. David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
    4. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    5. Keith M. Carlson, 1987. "Federal fiscal policy since the Employment Act of 1946," Review, Federal Reserve Bank of St. Louis, issue Dec, pages 14-29.
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    Cited by:

    1. Pierre-Yves Hénin, 1997. "Soutenabilité des déficits et ajustements budgétaires," Revue Économique, Programme National Persée, vol. 48(3), pages 371-395.
    2. Martner Fanta, Ricardo, 2000. "Automatic fiscal stabilizers," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    3. Jonathan Millar, 1997. "The Effects of Budget Rules on Fiscal Performance and Macroeconomic Stabilization," Staff Working Papers 97-15, Bank of Canada.

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