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

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

The aim of the paper is to evaluate the robustness of the theory that claims for restrictive effects of expansionary fiscal policy. It shows that such socalled “non-Keynesian effects” may arise as a consequence of a synchronous and opposite monetary policy intervention. The paper demonstrate this conclusion through a stylized model – supported by an empirical investigation on ECB and FED reaction functions - in which Central Banks take into account deficit spending as an element that generate inflation expectations. The econometric analysis shows also 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 D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy in its series Discussion Papers with number 8_2007.

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Date of creation: 01 Apr 2007
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Handle: RePEc:prt:dpaper:8_2007
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