IDEAS home Printed from https://ideas.repec.org/a/oup/oxford/v26y2010i1p38-47.html
   My bibliography  Save this article

The theory of the fiscal stimulus: how will a debt-financed stimulus affect the future?

Author

Listed:
  • W. Max Corden

Abstract

This paper takes a close look at the Keynesian theory underlying the policy of fiscal stimulus being undertaken or considered in many countries, led by the United States. A central question is whether a debt-financed fiscal stimulus now must adversely affect future taxpayers, owing to the debt burden being created. There are many interesting issues considered, for example, the role of automatic stabilizers, and the basis for Keynes's paradox of thrift. The model used is for a single country with a floating exchange rate. It is assumed that, for various reasons, monetary policy cannot eliminate high unemployment and a resultant output gap . In fact, there is a market failure, which government action needs to compensate for, at least temporarily. Copyright 2010, Oxford University Press.

Suggested Citation

  • W. Max Corden, 2010. "The theory of the fiscal stimulus: how will a debt-financed stimulus affect the future?," Oxford Review of Economic Policy, Oxford University Press, vol. 26(1), pages 38-47, Spring.
  • Handle: RePEc:oup:oxford:v:26:y:2010:i:1:p:38-47
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/oxrep/grq001
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:wsi:serxxx:v:62:y:2017:i:02:n:s0217590816500041 is not listed on IDEAS
    2. Jha, Shikha & Mallick, Sushanta K. & Park, Donghyun & Quising, Pilipinas F., 2014. "Effectiveness of countercyclical fiscal policy: Evidence from developing Asia," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 82-98.
    3. W. Corden, 2011. "Ambulance Economics: The Pros and Cons of Fiscal Stimuli," Open Economies Review, Springer, vol. 22(2), pages 235-245, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxford:v:26:y:2010:i:1:p:38-47. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: https://academic.oup.com/oxrep .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.