Authors-Berhanu Arega Shiferaw
Abstract- This article explores the correlation between U.S. government spending and the deficit and its potential implications for economic policy within Modern Monetary Theory. The study utilized the Vector Autoregression Model and a specific dataset to estimate the coefficients and assess statistical significance. The findings suggest a negative relationship between government expenditure and the deficit, indicating that an increase in government spending is associated with a decrease in the deficit, holding other factors constant. The prediction is that when there is an additional one Billion Dollars of government expenditure, there will be a negative deficit increase by -.0767396 Billion Dollars. The statistical analysis reveals a significant p-value and a strong negative correlation coefficient.
