A Commentary on US Sovereign Debt Persistence and Nonlinear Fiscal Adjustment

Andrić, Vladimir and Bodroža, Duško and Đukić, Mihajlo (2024) A Commentary on US Sovereign Debt Persistence and Nonlinear Fiscal Adjustment. Mathematics, 12 (20). ISSN 2227-7390

[img] Text
mathematics-12-03250.pdf - Published Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (2MB)

Abstract

The purpose of this paper is to show how the self-exciting threshold autoregressive (SETAR) model might be a suitable econometric framework for characterizing the dynamics of the US public debt/GDP ratio after the Bretton Woods collapse. Our preferred SETAR specifications are capable of capturing the main stylized facts of the US public debt/GDP ratio between 1974 and 2024. In addition, the estimated SETAR models are consistent with theoretical frameworks that look to explain the behavior of the US public debt/GDP ratio before and after the Global Financial Crisis (GFC). Finally, under the assumption of public debt/GDP ratio stationarity, for which we find only limited and inconclusive evidence, this paper provides some arguments for why previous studies, which use the exponential smooth threshold autoregressive (ESTAR) models, logistic smooth threshold autoregressive (LSTAR) models or SETAR-type models for the first differences of the US public debt/GDP ratio, are potentially misspecified on both econometric and economic grounds.

Item Type: Article
Uncontrolled Keywords: SETAR model, United States, sovereign debt, persistence, nonlinear fiscal adjustment
Research Department: Economic Theory
Depositing User: Jelena Banovic
Date Deposited: 17 Oct 2024 10:32
Last Modified: 17 Oct 2024 10:32
URI: http://ebooks.ien.bg.ac.rs/id/eprint/2110

Actions (login required)

View Item View Item