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On Keynesian effects of (apparent) non-Keynesian fiscal policies

  • Canale, Rosaria Rita
  • Foresti, Pasquale
  • Marani, Ugo
  • Napolitano, Oreste

The aim of this paper is to evaluate the robustness of the theory that claims restrictive effects of expansionary fiscal policy. It shows that such so-called “non-Keynesian effects” may arise from synchronous and opposite monetary policy interventions. The paper demonstrates this conclusion through a stylized model – supported by an empirical investigation on ECB and FED reaction functions – in which Central Banks consider deficit spending as an element that generates inflation expectations. Econometric analysis also shows that the ECB reacts asymmetrically to deficit spending variations while the FED has a linear reaction to this indicator.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3742.

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Date of creation: 30 Jun 2007
Date of revision: Jun 2007
Handle: RePEc:pra:mprapa:3742
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