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How Little We Know About Deficit Policy Effects

Quarterly Review 1611 | Winter 1992

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Authors

Preston J. Miller Former Vice President and Monetary Adviser

William Roberds

How Little We Know About Deficit Policy Effects

Abstract

We use a simple model to show why previous empirical studies of budget policy effects are flawed. Due to an identification problem, those studies' findings can be shown to be consistent with policies either mattering or not. We argue that this problem is difficult and not likely to be resolved soon.