How does the U.S. government finance fiscal shocks?
By: Antje Berndt, Hanno Lustig, Sevin Yeltekin
Contributors: Lustig, Hanno; Yeltekin, Şevin; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16458; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16458.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "We develop a method for identifying and quantifying the fiscal channels that help finance government spending shocks.  We define fiscal shocks as surprises in defense spending and show that they are more precisely identified when defense stock data are used in addition to aggregate macroeconomic data.  Our results show that in the postwar period, over 9% of the U.S.  government's unanticipated spending needs were financed by a reduction in the market value of debt and more than 73% by an increase in primary surpluses.  Additionally, we find that long-term debt is more effective at absorbing fiscal risk than short-term debt"--National Bureau of Economic Research web site.
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