Deficit Spending, Expectations, and Fiscal Policy Effectiveness
AbstractThis paper develops a formal theoretical model within which it investigates mathematically the policy implications of adverse business expectations involving deficit financing. It is found that hostility towards deficit financing will always diminish the effectiveness of fiscal policy and render the ultimate impact of fiscal policy indeterminate. Potentially, a fiscal policy aimed at expansion may lead to a perverse final effect: a decline in economic activity. The model constructed allows deficit financing to influence the money supply.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 52328.
Date of creation: 14 Mar 1972
Date of revision:
Publication status: Published in Public Finance/Finances Publiques 3-4.28(1973): pp. 362-370
budget deficit; fiscal policy effectiveness; business expectations;
Other versions of this item:
- Cebula, Richard J, 1973. "Deficit Spending, Expectations, and Fiscal Policy Effectiveness," Public Finance = Finances publiques, , , vol. 28(3-4), pages 362-70.
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H69 - Public Economics - - National Budget, Deficit, and Debt - - - Other
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Silber, William L, 1970. "Fiscal Policy in IS-LM Analysis: A Correction," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 2(4), pages 461-72, November.
- William Jackson, 1976. "Determinants of long-term bond risk," Working Paper, Federal Reserve Bank of Richmond 76-03, Federal Reserve Bank of Richmond.
- Lehment, Harmen, 1983. "The macroeconomic implications of public sector deficits," Kiel Working Papers 168, Kiel Institute for the World Economy.
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