Econometric implications of the government budget constraint

Christopher A. Sims

doi:10.1016/S0304-4076(97)00063-8

Econometric implications of the government budget constraint

Christopher A. Sims

Research output: Contribution to journal › Article › peer-review

22 Scopus citations

Abstract

Despite Christ's (1968) warnings, modern macroeconometric models for policy analysis still fail to treat the government budget constraint (GBC) adequately. I point out that the potential consequences of mistaken handling of the GBC become more severe as forward-looking behavior is incorporated in macroeconometric models. Furthermore, contrary to popular belief, careful treatment of the GBC is shown to be a matter of primary importance even in models of the short and medium term.

Original language	English (US)
Pages (from-to)	9-19
Number of pages	11
Journal	Journal of Econometrics
Volume	83
Issue number	1-2
DOIs	https://doi.org/10.1016/S0304-4076(97)00063-8
State	Published - 1998

All Science Journal Classification (ASJC) codes

Economics and Econometrics

Keywords

Government budget constraint
Ricardian equivalence
Taxation

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10.1016/S0304-4076(97)00063-8

Cite this

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title = "Econometric implications of the government budget constraint",

abstract = "Despite Christ's (1968) warnings, modern macroeconometric models for policy analysis still fail to treat the government budget constraint (GBC) adequately. I point out that the potential consequences of mistaken handling of the GBC become more severe as forward-looking behavior is incorporated in macroeconometric models. Furthermore, contrary to popular belief, careful treatment of the GBC is shown to be a matter of primary importance even in models of the short and medium term.",

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AB - Despite Christ's (1968) warnings, modern macroeconometric models for policy analysis still fail to treat the government budget constraint (GBC) adequately. I point out that the potential consequences of mistaken handling of the GBC become more severe as forward-looking behavior is incorporated in macroeconometric models. Furthermore, contrary to popular belief, careful treatment of the GBC is shown to be a matter of primary importance even in models of the short and medium term.

KW - Government budget constraint

KW - Ricardian equivalence

KW - Taxation

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Econometric implications of the government budget constraint

Abstract

All Science Journal Classification (ASJC) codes

Keywords

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