IDEAS home Printed from https://ideas.repec.org/h/pal/palchp/978-0-230-35384-8_10.html
   My bibliography  Save this book chapter

Fiscal Policy in a Stock-Flow Consistent (SFC) Model

In: The Stock-Flow Consistent Approach

Author

Listed:
  • Wynne Godley
  • Marc Lavoie

Abstract

In our book Monetary Economics (Godley and Lavoie 2007, chapter 11), we claimed that a particular level of government expenditure relative to tax rates, and also relative to gross domestic product (GDP), is essential if stable, noninflationary growth and full employment are to be achieved. We argued, on the basis of simulation models, that monetary policy on its own was unable to maintain full employment and low inflation for more than a short period of time, unless fiscal policy was appropriate. Our conclusions conflict with those of the ‘new consensus,’ which holds that a correct setting of interest rates is the necessary and sufficient condition for achieving noninflationary growth at full employment, leaving fiscal policy rather in the air. This has led different countries to adopt different targets for the nominal budget deficit and government debt as proportions of (nominal) GDP measured ex post.1 But the rationale for such targets has never been clear (at least to us).

Suggested Citation

  • Wynne Godley & Marc Lavoie, 2012. "Fiscal Policy in a Stock-Flow Consistent (SFC) Model," Palgrave Macmillan Books, in: Marc Lavoie & Gennaro Zezza (ed.), The Stock-Flow Consistent Approach, chapter 9, pages 194-215, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-35384-8_10
    DOI: 10.1057/9780230353848_10
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    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:pal:palchp:978-0-230-35384-8_10. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.