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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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    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.

    Metadata

    Item Type: Article
    Keyword(s) / Subject(s): Information value, state-local finances, fiscal variables, Granger causality
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centre: Applied Macroeconomics, Birkbeck Centre for
    Depositing User: Administrator
    Date Deposited: 08 Mar 2011 10:33
    Last Modified: 06 Dec 2016 14:49
    URI: http://eprints.bbk.ac.uk/id/eprint/3181

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