"We analyze the fiscal adjustment process in the United States using a multivariate threshold vector error regression model. The shift from single-equation to multivariate setting adds value both in terms of our economic understanding of the fiscal adjustment process and the forecasting...

We contribute to the debate on whether the U.S. large federal budget deficits are sustainable in the long run. We model the U.S. government deficit per capita as a threshold autoregressive process. We find evidence that the U.S. budget deficit is sustainable in the long run and that economic...