We model the joint process for real per capita U.S. federal government spending and tax revenues as a Threshold Vector Error Correction. We find evidence that fiscal authorities will intervene to reduce real per capita deficit only when it reaches a certain threshold. We also find that fiscal...

Conditional heteroskedasticity is an important feature of many macroeconomic and financial time series. Standard residual-based bootstrap procedures for dynamic regression models treat the regression error as i.i.d. These procedures are invalid in the presence of conditional heteroskedasticity....