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An estimated fiscal Taylor Rule for the postwar United States

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  • Reicher, Christopher Phillip

Abstract

This paper estimates a multi-instrument fiscal Taylor Rule for the United States. Taxes and purchases both respond strongly to deficits, while transfers do not. Taxes are procyclical; purchases are acyclical; and transfers are countercyclical. These estimates appear stable over time.

Suggested Citation

  • Reicher, Christopher Phillip, 2012. "An estimated fiscal Taylor Rule for the postwar United States," Economics Letters, Elsevier, vol. 114(3), pages 319-321.
    • Handle: RePEc:eee:ecolet:v:114:y:2012:i:3:p:319-321
    DOI: 10.1016/j.econlet.2011.10.020
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    References listed on IDEAS

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    1. Henning Bohn, "undated". "Budget Balance Through Revenue or Spending Adjustments ? Some Historical Evidence for the United States (Reprint 013)," Rodney L. White Center for Financial Research Working Papers 03-91, Wharton School Rodney L. White Center for Financial Research.
    2. Giancarlo Corsetti & André Meier & Gernot J. Müller, 2012. "Fiscal Stimulus with Spending Reversals," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 878-895, November.
    3. Alan J. Auerbach, 2002. "Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 109-150.
    4. Giancarlo Corsetti & Keith Kuester & André Meier & Gernot J. Müller, 2010. "Debt Consolidation and Fiscal Stabilization of Deep Recessions," American Economic Review, American Economic Association, vol. 100(2), pages 41-45, May.
    5. Bohn, Henning, 1991. "Budget balance through revenue or spending adjustments? : Some historical evidence for the United States," Journal of Monetary Economics, Elsevier, vol. 27(3), pages 333-359, June.
    6. Jordi Gali & Roberto Perotti, 2003. "Fiscal Policy and Monetary Integration in Europe," NBER Working Papers 9773, National Bureau of Economic Research, Inc.
    7. John B. Taylor, 2000. "Reassessing Discretionary Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 21-36, Summer.
    8. Bohn, Henning, 1992. "Endogenous Government Spending and Ricardian Equivalence," Economic Journal, Royal Economic Society, vol. 102(412), pages 588-597, May.
    9. Jordi Galí & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe [‘Consumption smoothing through fiscal policy in OECD and EU countries’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 18(37), pages 533-572.
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    Citations

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    Cited by:

    1. Shobande Olatunji Abdul, 2020. "Fiscal Rule in Africa," Open Economics, De Gruyter, vol. 3(1), pages 112-120, January.
    2. Plödt, Martin & Reicher, Claire A., 2015. "Estimating fiscal policy reaction functions: The role of model specification," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 113-128.
    3. Reicher, Claire, 2014. "Systematic fiscal policy and macroeconomic performance: A critical overview of the literature," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-37.
    4. Reicher, Christopher Phillip, 2013. "A set of estimated fiscal rules for a cross section of countries: Stabilization and consolidation through which instruments?," Kiel Working Papers 1850, Kiel Institute for the World Economy (IfW Kiel).
    5. Kassouri, Yacouba & Altıntaş, Halil, 2021. "Cyclical drivers of fiscal policy in sub-Saharan Africa: New insights from the time-varying heterogeneity approach," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 51-67.
    6. Guido Baldi & Karsten Staehr, 2013. "The European debt crisis and fiscal reaction functions in Europe 2000–2012," Bank of Estonia Working Papers wp2013-5, Bank of Estonia, revised 24 Jul 2013.
    7. Shobande Olatunji Abdul, 2020. "Fiscal Rule in Africa," Open Economics, De Gruyter, vol. 3(1), pages 112-120, January.
    8. Plödt, Martin & Reicher, Claire, 2014. "Estimating simple fiscal policy reaction functions for the euro area countries," Kiel Working Papers 1899, Kiel Institute for the World Economy (IfW Kiel).
    9. César Calderón & Roberto Duncan & Klaus Schmidt-Hebbel, 2016. "Do Good Institutions Promote Countercyclical Macroeconomic Policies?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(5), pages 650-670, October.
    10. Reicher, Claire, 2014. "A set of estimated fiscal rules for a cross-section of countries: Stabilization and consolidation through which instruments?," Journal of Macroeconomics, Elsevier, vol. 42(C), pages 184-198.
    11. Reicher, Claire A., 2014. "Fiscal targeting rules and macroeconomic stability under distortionary taxation," Kiel Working Papers 1968, Kiel Institute for the World Economy (IfW Kiel).

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    More about this item

    Keywords

    Spending reversals; Fiscal Taylor Rule; Deficits; Taxes; Government spending; Transfer payments;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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