What Do Budget Deficits Do?
AbstractThis paper discusses the effects of budget deficits on the economy in four steps. First, it reviews standard theory about how budget deficits influence saving, investment, the trade balance, interest rates, exchange rates, and long-term growth. Second, it offers a rough estimate of the magnitude of some of the effects. Third, it discusses how budget deficits affect economic welfare. Finally, it considers the possibility that continuing budget deficits in a country could lead to a 'hard landing' in which the demand for the country's assets suddenly collapses.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5263.
Date of creation: Apr 1996
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Other versions of this item:
- Laurence Ball & N. Gregory Mankiw, 1995. "What do Budget Deficits Do?," Harvard Institute of Economic Research Working Papers 1740, Harvard - Institute of Economic Research.
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