Munich Personal RePEc Archive

Budget Deficits and Economic Growth

Belton, Willie and Cebula, Richard (1992): Budget Deficits and Economic Growth. Published in: American Statistical Association 1993 Proceedings of the Business and Economic Statistics Section , Vol. 88, No. 1 (15 December 1993): pp. 343-347.


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The present paper examines the impact that budget deficits exercise on economic growth in the United States. Using a simple growth model that includes a variety of public policy variables, we provide Instrumental Variables (IV) estimates that indicate growth in the United States over time. The findings imply that higher levels of government spending have a minimal effect on economic growth, whereas higher budget deficits and tax rates reduce economic growth.

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