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Limitations of the Government Budget Constraint: Users vs. Issuers of the Currency

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  • Stephanie Kelton

Abstract

The financial crisis and ensuing economic meltdown has led to sharp increases in the deficits and debt levels of many advanced economies. The run-up in public sector indebtedness helped to restore private sector balance sheets, laying the foundation for economic recovery in these regions. But the so-called “sovereign” debt crisis in the Eurozone has undermined the fiscal resolve that has, thus far, kept truly sovereign governments from slipping into a bona fide depression. Fearful of becoming the next Greece, governments that could allow an unlimited fiscal adjustment to restore full employment, are methodically weakening their fiscal support mechanisms and setting themselves on a path to becoming the next Japan. Key words: Fiscal policy, Deficit, Sovereign risk.JEL: E62, H62, F34.

Suggested Citation

  • Stephanie Kelton, 2011. "Limitations of the Government Budget Constraint: Users vs. Issuers of the Currency," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(1), pages 57-66.
    • Handle: RePEc:voj:journl:v:58:y:2011:i:1:p:57-66:id:142
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    More about this item

    Keywords

    Fiscal policy; Deficit; Sovereign risk;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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