We undertake tests of whether long term data from the U.S. and U.K. are consistent with the intertemporal government budget constraint and the intertemporal external borrowing constraint being satisfied in expected value terms, both individually and simultaneously. An historical perspective is...

In this paper, we use an open economy DGE model (SIGMA) to assess the quantitative effects of fiscal shocks on the trade balance in the United States. We examine the effects of two alternative fiscal shocks: a rise in government consumption, and a reduction in the labor income tax rate. Our...