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The evolution of fiscal policy theory and the Eurozone

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  • Rosaria Rita Canale

    (Dipartimento di Studi Aziendali ed Economici, Universita` degli Studi di Napoli ‘‘Parthenope’)

Abstract

This paper is devoted to fiscal policy theory and to how its evolution influenced the policy principles implemented from the end of the WWII to nowadays. It shows how the theoretical foundations evolved, from the Keynesian theory according to which public expenditure was conceived as an instrument to sustain aggregate demand and achieve full employment, to the present theoretical framework in which, following the intertemporal approach, it has been downgraded to an external shock. After the occurrence of the great financial crisis a new process of revision started, according to which, in times of declining macroeconomic conditions, fiscal policy has not only short-run effects on income, but also long run effects on potential output. However, it did not yet translate into a new role for fiscal policy at least in the Eurozone.

Suggested Citation

  • Rosaria Rita Canale, 2019. "The evolution of fiscal policy theory and the Eurozone," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 127(2), pages 173-194.
    • Handle: RePEc:vep:journl:y:2019:v:127:i:2:p:173-194
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    File URL: https://riss.vitaepensiero.it/scheda-articolo_digital/rosaria-rita-canale/the-evolution-of-fiscal-policy-theory-and-the-eurozone-000518_2019_0002_0173-369464.html
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    Cited by:

    1. Cristea Loredana Andreea & Voda Alina Daniela & Ungureanu Dragos Mihai, 2021. "Fiscal Policy And The Conceptual Mechanism Of Fiscal System," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 80-86, April.

    More about this item

    Keywords

    Fiscal policy; Keynesian approach; Intertemporal approach; Public finance; Eurozone;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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