Are Adjustments in the U.S. Budget Deficit Asymmetric? Another Look at Sustainability

This study examines the sustainability along with the structural stability of the U.S. federal budget deficit over the post World War II period. Allowing for an endogenously determined structural break in 1982:1, tests of unit roots based on Perron's 1997] methodology suggest a stationary and sustainable budget deficit. Moreover, threshold autoregressive and momentum threshold autoregressive models do not detect asymmetries in the response of the budget deficit to deviations from its long-run trend.