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On the Relevance or Irrelevance of Public Financial Policy

In: The Economics of Public Debt

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  • Joseph E. Stiglitz

    (Princeton University)

Abstract

There is a long-standing belief that while the money supply affects the price level, ‘real’ variables are determined independently. This proposition is generally referred to as the classical dichotomy. Variants of this belief in the inefficacy of monetary policy, its inability to effect anything real, have regained strength with the emergence of the new classical economists. This belief, however, is far from universal, with some economists maintaining that government deficits, while inflationary, displace private investment, while other, more traditional Keynesian economists claim that government deficits and monetary expansion can have real effects without at the same time inducing inflation.

Suggested Citation

  • Joseph E. Stiglitz, 1988. "On the Relevance or Irrelevance of Public Financial Policy," International Economic Association Series, in: Kenneth J. Arrow & Michael J. Boskin (ed.), The Economics of Public Debt, chapter 2, pages 41-76, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-19459-9_2
    DOI: 10.1007/978-1-349-19459-9_2
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    References listed on IDEAS

    as
    1. 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..
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