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An avenue for expansionary fiscal contractions


  • Afonso, António


Expansionary fiscal contractions were first illustrated by several fiscal episodes that occurred in Europe during the 1980s. This paper suggests a simple analytical textbook model that encompasses both Keynesian and non-Keynesian effects of fiscal policy. In such a context, the possibility of expansionary fiscal contractions is linked to the responsiveness of the risk premium of domestic interest rates to the budgetary position of the government and to the existence of credit-rationed consumers.

Suggested Citation

  • Afonso, António, 2007. "An avenue for expansionary fiscal contractions," MPRA Paper 4593, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4593

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    References listed on IDEAS

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    More about this item


    fiscal policy; expansionary fiscal contractions; non-Keynesian effects;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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