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U.S. fiscal indicators, inflation and output

Aksoy, Yunus and Melina, Giovanni (2011) U.S. fiscal indicators, inflation and output. The North American Journal of Economics and Finance 22 (3), pp. 221-236. ISSN 1062-9408.

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Official URL: http://dx.doi.org/10.1016/j.najef.2011.02.001

Abstract

In this paper we explore the information content of a large set of fiscal indicators for U.S. real output growth and inflation. We provide evidence that fluctuations in certain fiscal variables contain valuable information to predict fluctuations in output and prices. The distinction between federal and state-local fiscal indicators yields useful insights and helps define a new set of stylized facts for U.S. macroeconomic conditions. First, we find that variations in state-local indirect taxes as well as state government surplus or deficit help predict output growth. Next, the federal counterparts of these indicators contain valuable information for inflation. Finally, state-local expenditures help predict U.S. inflation. A set of formal and informal stability tests confirm that these relationships are stable. The fiscal indicators in questions are also among the ones that yield the best in-sample and out-of-sample performances.

Item Type: Article
Keyword(s) / Subject(s): Information value, state-local finances, fiscal variables, Granger causality
School or Research Centre: Birkbeck Schools and Research Centres > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
Depositing User: Administrator
Date Deposited: 08 Mar 2011 10:33
Last Modified: 17 Apr 2013 12:20
URI: http://eprints.bbk.ac.uk/id/eprint/3181

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