This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Case for Fiscal Policy

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Philip Arestis (The Levy Economics Institute)
Malcolm Sawyer (Leeds University)

Additional information is available for the following registered author(s):

Abstract

This paper reconsiders the case for the use of fiscal policy based on a "functional finance" approach that advocates the use of fiscal policy to secure high levels of demand in the context of private aggregate demand, which would otherwise be too low. This "functional finance" view means that any budget deficit should be seen as a response to the perceived excess of private savings over investment at the desired level of economic activity. The paper outlines the "functional finance" approach and its relationship with fiscal policy. It then considers the three lines of argument that have been advanced against fiscal policy on the grounds of "crowding out." These lines are based on the response of interest rates, the supply-side equilibrium, and Ricardian equivalence. The paper advances the view that the arguments, which have been deployed against fiscal policy to the effect that it does not raise the level of economic activity, do not apply when a "functional finance" view of fiscal policy is adopted. A section on the intertermporal budget constraint considers whether this constraint rules out budget deficits, and concludes that in general it does not.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://129.3.20.41/eps/get/papers/0306/0306005.pdf
File Format: application/pdf
File Function:
Download Restriction: no
File URL: http://129.3.20.41/eps/get/papers/0306/0306005.ps.gz
File Format: application/postscript
File Function:
Download Restriction: no
File URL: http://129.3.20.41/eps/get/papers/0306/0306005.doc.gz
File Format: application/msword
File Function:
Download Restriction: no

Publisher Info
Paper provided by EconWPA in its series General Economics and Teaching with number 0306005.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 26 pages
Date of creation: 05 Jun 2003
Date of revision:
Handle: RePEc:wpa:wuwpgt:0306005

Note: Type of Document - MS Word; prepared on PC; to print on HP/PostScript; pages: 26 ; figures: included
Contact details of provider:
Web page: http://129.3.20.41

For technical questions regarding this item, or to correct its listing, contact: (EconWPA).

Related research
Keywords: fiscal policy; functional finance; Ricardian Equivalence Theorem; inter-temporal budget constraint;

Other versions of this item:

Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Buiter, Willem H, 2001. "Notes on 'A Code for Fiscal Stability.'," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 1-19, January.
    Other versions:
  2. Philip Arestis & Malcolm Sawyer, 2003. "Reinventing fiscal policy," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 26(1), pages 3-25, October. [Downloadable!] (restricted)
    Other versions:
  3. Barro, Robert J, 1989. "The Ricardian Approach to Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 37-54, Spring. [Downloadable!] (restricted)
    Other versions:
  4. Gerald P. Dwyer, Jr. & R. W. Hafer, 1998. "The federal government's budget surplus: Cause for celebration?," Economic Review, Federal Reserve Bank of Atlanta, issue Q 3, pages 42-51. [Downloadable!]
  5. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December. [Downloadable!] (restricted)
  6. Hyman P. Minsky, 1991. "Financial Crises: Systemic or Idiosyncratic," Economics Working Paper Archive 51, Levy Economics Institute, The. [Downloadable!]
  7. Philip Arestis & Malcolm Sawyer, 2002. "Can Monetary Policy Affect The Real Economy?," Economics Working Paper Archive 355, Levy Economics Institute, The. [Downloadable!]
    Other versions:
  8. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec.. [Downloadable!] (restricted)
  9. Wynne Godley, 1999. "Seven Unsustainable Processes: Medium-Term Prospects and Policies for the United States and the World," Economics Strategic Analysis Archive 99-10, Levy Economics Institute, The. [Downloadable!]
  10. Chadha, Jagjit S & Dimsdale, Nicholas H, 1999. "A Long View of Real Rates," Oxford Review of Economic Policy, Oxford University Press, vol. 15(2), pages 17-45, Summer.
  11. Wynne Godley, . "Fiscal Policy To The Rescue," Economics Policy Note Archive 01-1, Levy Economics Institute, The. [Downloadable!]
Full references

Cited by:
(explanations, 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.)

  1. Jean-Marie Monnier & Bruno Tinel, 2006. "Endettement public et redistribution en France de 1980 à 2004," Cahiers de la Maison des Sciences Economiques r06006, Université Panthéon-Sorbonne (Paris 1). [Downloadable!]
  2. Angel Asensio, 2008. "(Post) Keynesian alternative to inflation targeting," Post-Print halshs-00335560_v1, HAL. [Downloadable!]
  3. Philip Arestis, Malcolm Sawyer, 2003. "Reinventing Fiscal Policy," Economics Working Paper Archive 381, Levy Economics Institute, The. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? IDEAS also indexes software components.

This page was last updated on 2009-11-13.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.