IDEAS home Printed from https://ideas.repec.org/p/lev/wrkpap/wp_569.html
   My bibliography  Save this paper

Fiscal Policy and the Economics of Financial Balances

Author

Listed:
  • Gennaro Zezza

Abstract

This paper presents the main features of the macroeconomic model being used at The Levy Economics Institute of Bard College, which has proven to be a useful tool in tracking the current financial and economic crisis. We investigate the connections of the model to the "New Cambridge" approach, and discuss other recent approaches to the evolution of financial balances for all sectors of the economy. We will finally show the effects of fiscal policy in the model, and its implications for the proposed fiscal stimulus on the U.S. economy. We show that the New Cambridge hypothesis, which claimed that the private sector financial balance would be stable relative to income in the short run, does not hold for the short term in our model, but it does hold for the medium/long term. This implies that the major impact of the fiscal stimulus in the long run will be on the external imbalance, unless other measures are taken.

Suggested Citation

  • Gennaro Zezza, 2009. "Fiscal Policy and the Economics of Financial Balances," Economics Working Paper Archive wp_569, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_569
    as

    Download full text from publisher

    File URL: http://www.levyinstitute.org/pubs/wp_569.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gennaro Zezza, 2009. "Fiscal policy and the economics of financial balances," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, pages 289-310.
    2. Rebecca M. Blank, 1991. "Why Were Poverty Rates So High in the 1980s?," Economics Working Paper Archive wp_57, Levy Economics Institute.
    3. Easterlin, Richard A & Macdonald, Christine & Macunovich, Diane J, 1990. "How Have American Baby Boomers Fared? Earnings and Economic Well-Being of Young Adults, 1964-1987," Journal of Population Economics, Springer;European Society for Population Economics, pages 277-290.
    4. Susan E. Mayer & Christopher Jencks, 1989. "Poverty and the Distribution of Material Hardship," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 88-114.
    5. Katharine L. Bradbury, 1986. "The shrinking middle class," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 41-55.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Incorporating the Rentier Sectors into a Financial Model
      by Michael in Michael Hudson on 2012-09-12 16:56:01

    Citations

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


    Cited by:

    1. Piero Ferri, 2011. "Macroeconomics of Growth Cycles and Financial Instability," Books, Edward Elgar Publishing, number 14260, September.
    2. Stockhammer, Engelbert & Wildauer, Rafael, 2015. "Debt-driven growth? Wealth, distribution and demand in OECD countries," Economics Discussion Papers 2015-2, School of Economics, Kingston University London.
    3. Michael Hudson & Dirk Bezemer, 2012. "Incorporating the Rentier Sectors into a Financial Model," World Economic Review, World Economics Association, vol. 2012(1), pages 1-1, September.
    4. Engelbert Stockhammer & Rafael Wildauer, 2016. "Debt-driven growth? Wealth, distribution and demand in OECD countries," Cambridge Journal of Economics, Oxford University Press, vol. 40(6), pages 1609-1634.
    5. Casadio, Paolo & Paradiso, Antonio, 2010. "Private sector balance, financial markets, and U.S. cycle: A SVAR analysis," MPRA Paper 28105, University Library of Munich, Germany.
    6. Sergio Cesaratto, 2012. "Neo-Kaleckian and Sraffian controversies on accumulation theory," Department of Economics University of Siena 650, Department of Economics, University of Siena.
    7. Gennaro Zezza, 2012. "The impact of fiscal austerity in the Eurozone," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(0), pages 37-54.
    8. Yannis Dafermos, 2015. "Debt cycles, instability and fiscal rules: a Godley-Minsky model," Working Papers 20151509, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    9. Stockhammer, Engelbert & Rabinovich, Joel & Reddy, Niall, 2017. "Distribution, wealth and demand regimes in historical perspective. USA, UK, France and Germany, 1855-2010," Economics Discussion Papers 2017-5, School of Economics, Kingston University London.

    More about this item

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:lev:wrkpap:wp_569. 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: (Elizabeth Dunn). General contact details of provider: http://www.levyinstitute.org .

    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.