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The Role of Fiscal Policy in the Eighties

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  • J. W. NEVILE

Abstract

After surveying objections to using expansionary fiscal policy to raise output and employment. this article concludes that budget deficits do not necessarily lead to high interest rates and that crowding out is only moderate. even with non‐accommodating monetary policy. The major constraint on the effectiveness of expansionary fiscal policy is the need to avoid devaluation. If real wages are rigid downwards. devaluation will lead to increases in inflationary pressure rather than increases in output. Because of this. and because of inflationary pressure from short‐run Phillips curve effects. expansionary fiscal policy must be complemented by a prices and incomes policy.

Suggested Citation

  • J. W. Nevile, 1983. "The Role of Fiscal Policy in the Eighties," The Economic Record, The Economic Society of Australia, vol. 59(1), pages 1-15, March.
    • Handle: RePEc:bla:ecorec:v:59:y:1983:i:1:p:1-15
    DOI: 10.1111/j.1475-4932.1983.tb00576.x
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    References listed on IDEAS

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    Cited by:

    1. A. Petridis, 1984. "Prospects for the Australian Economy in 1984," The Economic Record, The Economic Society of Australia, vol. 60(1), pages 1-15, March.
    2. GC Harcourt & Peter Kriesler & John Langmore, 2013. "Faith, works and talents entwined: Driving forces behind John Nevile’s contributions," The Economic and Labour Relations Review, , vol. 24(2), pages 228-237, June.

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