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A wavelet analysis of US fiscal sustainability

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  • Cascio, Iolanda Lo

Abstract

In this paper, we reassess the relationship between primary deficit and lagged debt to GDP ratio (Bohn, 1998), to test for US debt sustainability over the period 1795–2012. Our analysis is rooted in the wavelet domain enabling the detection of interesting patterns and otherwise hidden information. We find evidence of long term fiscal sustainability but only up until 1995 and also we show that governments tend to respond more vigorously to budget deficits when the level of debt is high rather than low.

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  • Cascio, Iolanda Lo, 2015. "A wavelet analysis of US fiscal sustainability," Economic Modelling, Elsevier, vol. 51(C), pages 33-37.
    • Handle: RePEc:eee:ecmode:v:51:y:2015:i:c:p:33-37
    DOI: 10.1016/j.econmod.2015.07.008
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    6. Chen, Shyh-Wei & Wu, An-Chi, 2018. "Is there a bubble component in government debt? New international evidence," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 467-486.
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    10. Cosimo Magazzino & Mihai Mutascu, 2019. "A wavelet analysis of Italian fiscal sustainability," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-13, December.

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