Version 1
: Received: 3 September 2024 / Approved: 4 September 2024 / Online: 4 September 2024 (09:58:22 CEST)
How to cite:
Andric, V.; Bodroza, D.; Djukic, M. A Commentary on U.S. Sovereign Debt Persistence and Non-Linear Fiscal Adjustment. Preprints2024, 2024090355. https://doi.org/10.20944/preprints202409.0355.v1
Andric, V.; Bodroza, D.; Djukic, M. A Commentary on U.S. Sovereign Debt Persistence and Non-Linear Fiscal Adjustment. Preprints 2024, 2024090355. https://doi.org/10.20944/preprints202409.0355.v1
Andric, V.; Bodroza, D.; Djukic, M. A Commentary on U.S. Sovereign Debt Persistence and Non-Linear Fiscal Adjustment. Preprints2024, 2024090355. https://doi.org/10.20944/preprints202409.0355.v1
APA Style
Andric, V., Bodroza, D., & Djukic, M. (2024). A Commentary on U.S. Sovereign Debt Persistence and Non-Linear Fiscal Adjustment. Preprints. https://doi.org/10.20944/preprints202409.0355.v1
Chicago/Turabian Style
Andric, V., Dusko Bodroza and Mihajlo Djukic. 2024 "A Commentary on U.S. Sovereign Debt Persistence and Non-Linear Fiscal Adjustment" Preprints. https://doi.org/10.20944/preprints202409.0355.v1
Abstract
The purpose of this paper is to show how the self-exciting threshold autoregressive (SETAR) model could be an appropriate econometric framework for characterizing the dynamics of the U.S. public debt/GDP ratio after the Bretton Woods collapse. Our preferred SETAR specifications are capable in capturing the main stylized facts of the U.S. public debt/GDP ratio between 1974 and 2024. In addition, the estimated SETAR models are consistent with several theoretical frameworks that seek to explain the behavior of the U.S. public debt/GDP ratio before and after the Global Financial Crisis (GFC). Finally, the paper provides some arguments on why the previous studies that use the exponential smooth threshold autoregressive (ESTAR) models, or SETAR-type models for the first differences of the U.S. public debt/GDP ratio, are potentially mis-specified, both on econometric and economic grounds.
Keywords
SETAR model; United States; sovereign debt; persistence; non-linear fiscal adjustment
Subject
Business, Economics and Management, Econometrics and Statistics
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
