The impact of federal government budget deficits on economic growth in the united states: an empirical investigation, 1955–1992

Abstract

This study examines the impact on per capita real economic growth in the United States of federal budget deficits. The study also includes a variety of other public economic policies. The analysis provides an instrumental variables estimate dealing with quarterly data over the 1955–1992 period. The empirical findings indicate that federal budget deficits, over time, reduce the rate of economic growth. In addition, it is found that the growth rate of per capita real GDP is a decreasing function of federal personal and corporate income tax rates while being an increasing function of expansionary monetary policies in the form of net open market operations.