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Alternative Modes of Deficit Financing and Endogenous Monetary and Fiscal Policy 1923-1982

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  • Stephen J. Turnovsky

Abstract

This paper first investigates the effects of alternatives modes of deficit financing on the unemployment rate, inflation rate, and the real interest rate, within the framework of a small complete macroeconomic model. Secondly, it examines the nature of monetary and fiscal reaction functions. The two periods 1923- 1960 and 1961-1982 are considered, with substantial differences in behavior and policy being shown to exist between them The most important conclusion is that long-run monetary neutrality properties shown to exist over the latter period are not intrinsic to the economy, but rather are the result of the stabilization policies being conducted over that period.

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  • Stephen J. Turnovsky, 1987. "Alternative Modes of Deficit Financing and Endogenous Monetary and Fiscal Policy 1923-1982," NBER Working Papers 2123, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2123
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    1. Butkiewicz, James L., 1983. "The market value of outstanding government debt : Comment," Journal of Monetary Economics, Elsevier, vol. 11(3), pages 373-379.
    2. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1, March.
    3. Turnovsky, Stephen J & Wohar, Mark E, 1984. "Monetarism and the Aggregate Economy: Some Longer-Run Evidence," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 619-629, November.
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