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The International Transmission of Fiscal Expenditures and Budget Deficits in the World Economy

In: Economic Policy in Theory and Practice

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  • Jacob A. Frenkel
  • Assaf Razin

Abstract

This paper deals with the international transmission of the effects of fiscal expenditures and budget deficits. One of the major sources of recent friction between Europeans and Americans has been the interpretation of the economic implications of US budget deficits. Theorists and policymakers on both sides of the Atlantic have differed in the analysis of the role of budget deficits in affecting key macroeconomic aggregates. Specifically, some have argued that large budget deficits are responsible for the recently observed high real rates of interest while others have claimed that budget deficits cannot be blamed for these real rates. The latter group claimed that theory does not predict a clear-cut relation between budget deficits and rates of interest and that the empirical record itself is very weak.

Suggested Citation

  • Jacob A. Frenkel & Assaf Razin, 1987. "The International Transmission of Fiscal Expenditures and Budget Deficits in the World Economy," Palgrave Macmillan Books, in: Assaf Razin & Efraim Sadka (ed.), Economic Policy in Theory and Practice, chapter 2, pages 51-100, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-18584-9_2
    DOI: 10.1007/978-1-349-18584-9_2
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    1. Razin, Assaf & Svensson, Lars E. O., 1983. "The current account and the optimal government debt," Journal of International Money and Finance, Elsevier, vol. 2(2), pages 215-224, August.
    2. Frenkel, Jacob & Razin, Assaf, 1984. "Budget Deficits and Rates of Interest in the World Economy," Foerder Institute for Economic Research Working Papers 275380, Tel-Aviv University > Foerder Institute for Economic Research.
    3. Willem Buiter, 1987. "Fiscal Policy in Open, Interdependent Economies," Palgrave Macmillan Books, in: Assaf Razin & Efraim Sadka (ed.), Economic Policy in Theory and Practice, chapter 3, pages 101-144, Palgrave Macmillan.
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    Cited by:

    1. Martin S. Feldstein, 1986. "The Budget Deficit and the Dollar," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 355-409, National Bureau of Economic Research, Inc.
    2. Genser, Bernd, 1988. "Is there a need to coordinate fiscal policy among large industrial countries?," Discussion Papers, Series II 73, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    3. Jacques Le Cacheux & Christian Vasseur, 1985. "Endettement extérieur et politique économique," Revue de l'OFCE, Programme National Persée, vol. 13(1), pages 149-184.
    4. Guillermo A. Calvo & Maurice Obstfeld, 1985. "Optimal Time-Consistent Fiscal Policy with Uncertain Lifetimes," NBER Working Papers 1593, National Bureau of Economic Research, Inc.

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