Monetary and Public Debt Shocks: Tests and Efficient Estimates

IN AN ARTICLE IN THE JMCB, Barro [1] defined a form of intertemporal efficiency for the behavior of marginal tax rates (and expected tax rates). Given certain additional conditions on government expenditures, Barro's definition of efficiency implied that particular relationships and time paths would characterize federal deficits. In that paper, two of the seven predicted relationships were tested: (1) the sign of the relationship between the...