Fiscal Policy Cyclicality and Growth within the US States
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Justin Svec
This paper exploits differences in the stringency of balanced budget rules across US states to estimate the effect of the cyclicality of fiscal policy on state GDP growth. While most states have passed laws restricting deficits, the nature and strictness of these laws vary greatly. States with more stringent balanced budget restrictions run more procyclical fiscal policy. We use the diversity in these laws as an instrument for the cyclicality of policy. We find evidence that a more counter-cyclical primary deficit increases a state's average growth rate per capita. This effect is robust to a number of alternative specifications. One concrete policy implication of this analysis is that a state could increase its annual growth rate by relaxing its balanced budget restrictions.
©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Artikel in diesem Heft
- Advances Article
- Empirical Macroeconomics Using Geographical Data: Guest Editors' Introduction
- Fiscal Policy Cyclicality and Growth within the US States
- The Local Effects of Monetary Policy
- Dynamics of Wealth and Consumption: New and Improved Measures for U.S. States
- Banking Conditions and the Effects of Monetary Policy: Evidence from U.S. States
- Interstate Banking Deregulation and Bank Loan Commitments
Artikel in diesem Heft
- Advances Article
- Empirical Macroeconomics Using Geographical Data: Guest Editors' Introduction
- Fiscal Policy Cyclicality and Growth within the US States
- The Local Effects of Monetary Policy
- Dynamics of Wealth and Consumption: New and Improved Measures for U.S. States
- Banking Conditions and the Effects of Monetary Policy: Evidence from U.S. States
- Interstate Banking Deregulation and Bank Loan Commitments
