Canale, Rosaria Rita (2006): Positive effects of fiscal expansions on growth and debt.
Preview |
PDF
MPRA_paper_1432.pdf Download (181kB) | Preview |
Abstract
The aim of this paper is to point out the shortcomings of propositions that deny economic policy any active role and propose a simple model by which public expenditure is still recognised as performing an active and positive function. The core of our thesis is that public deficit, because it actually has positive effects on the rate of growth, does not automatically increase public debt but rather reduces it. These positive effects are greater if the Central Bank’s monetary policy rule does not change. The policy authority has no reason to change its behaviour since there is no strict relation between fiscal expansions and inflation. The smaller the economic weight of the country considered in terms of the whole Monetary Union, the weaker is the link. These conclusions suggest we should rethink the limits imposed by the Stability and Growth Pact to the action of governments and subordinate the possibility of spending to the inflationary effects of deficit on the whole Union.
Item Type: | MPRA Paper |
---|---|
Institution: | Università di Napoli "Federico II" |
Original Title: | Positive effects of fiscal expansions on growth and debt |
Language: | English |
Keywords: | fiscal policy; monetary union |
Subjects: | E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy |
Item ID: | 1432 |
Depositing User: | Rosaria Rita Canale |
Date Deposited: | 11 Jan 2007 |
Last Modified: | 27 Sep 2019 13:56 |
References: | Alesina, A. and Perotti R. (1997) “Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects”, International Monetary Fund Staff Papers 44(2): 210-48. Arestis P. and Sawyer (1998), “Keynesian Economic Policies for the New Millennium”, in Economic Journal vol.108, no.446. Arestis P. and Sawyer (2003), Macroeconomic Policies of the Economic Monetary Union: Theoretical Underpinnings and Challenge, The Levy Economic Institute, WP no.385. Bayoumi, T. and Masson P.R. (1995) “Fiscal Flows in the United States and Canada: Lessons for Monetary Union in Europe”, European Economic Review 39(2):253-74. Becker, T. (1997) “An Investigation of Ricardian Equivalence in a Common Trends Model”, Journal of Monetary Economics 39(3): 405-31. Bernheim, B. D. (1987) “Ricardian Equivalence: An Evaluation of Theory and Evidence”, in: S. Fischer, ed. NBER Macroeconomics Annual 1987: 263-304. Blanchard, O. and Perotti R. (1999) “An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output”, NBER Working Paper 7269. Bofinger P., Mayer E, Wollmershauser T. (2003), The BMW model. A New Framework for Teaching Monetary Economics in closed and open economies, Wurzburg Economic Papers, March. Buchanan, J.M. and Tullock G. (1962) The Calculus of Consent: Logical Foundation of Constitutional Democracy, University of Michigan Press, Ann Arbor, Mich. Clarida R. Gali J. Gertler M.(1999), “The Science of Monetary Policy: a New Keynesian Perspective”, in Journal of Economic Literature, vol.37, no.4 Dec. Drazen, A. (2000) Political Economy in Macroeconomics, Princeton University Press, Princeton, N.J. Eichengreen, B. and Bayoumi T. (1994) “The Political Economy of Fiscal Restrictions: Implications for Europe from the United States”, European Economic Review 38(3-4): 783-91. Eichengreen, B. Wyplosz C. (1993) “The Stability Pact: More than a Minor Nuisance?”, Economic Policy 26: 65-104. 32 Fair D.E. and de Boissieu C., (1992) eds., Fiscal Policy, Taxation and the Financial System in an Increasingly Integrated Europe, Kluwer, Dordrecht. Gavazzi F. Pagano M., (1996), “Non Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish experience”, Swedish Economic Policy Review, May Gruen, D. W. R. (1991) “What People Know and What Economists Think They Know: Surveys on Ricardian Equivalence”, Australian Economic Papers 30(56): 1-9. Hagen von , J.(1992) “Fiscal Arrangements in a Monetary Union: Evidence from the U.S.” in Fair and de Boissieu, (1992) Harcourt G. C. (1972), Some Cambridge Controversies in the Theory of Capital, Cambridge University Press. Italianer, A. Pisani-Ferry J. (1994) “The Regional Stabilization Properties of Fiscal Arrangements” in: J. Mortensen, ed. Improving Economic and Social Cohesion in the European Community, London: Macmillan Press: 155-94.. Jeanne, Olivier and Jeromin Zettelmeyer (2001) “International Bailouts, Moral Hazard and Conditionality”, Economic Policy 33: 407-32. Kaldor N. (1956), Alternative Theories of Distribution, in Review of Economic Studies, XXIII. Kaldor N. (1965), Essays on Economic Stability and Growth, London, Gerald Kaldor N. (1982), The Scourge of Monetarism, Oxford University Press, Oxford. Kaldor N. (1985), Economics without Equilibrium, Armonk (NY), M.E. Sharpe. Kalecki M. (1935), A Macrodynamic Theory of Business Cycles, in Econometrica, vol. 3, no. 3, July, pp. 327-344. Kalecki M. (1938), The Determination of Distribution of National Income, in Econometrica, vol. 6, no. 2, April, pp. 97-112. Kletzer, Kenneth and Jürgen von Hagen (2001) “Monetary Unions and Fiscal Federalism” in: Wyplosz (2001) Lavoie M. (1992), Foundations in Post-Keynesian Economics, Aldershot, Edward Elgar. Melitz J. (2000) “Some Cross-Country Evidence About Fiscal Policy Behaviour and Consequences for EMU”, European Economy 2: 3-21. Galì J. Monacelli T. (2005), Optimal Monetary and Fiscal Policy in a Currency Union, IGIER Working paper. Obstfeld M. (1997) “Destabilizing Effects of Exchange Rate Escape Clauses”, Journal of International Economics 43(1-2): 61-77. Persson, T. and Tabellini G. (2000) Political Economics, MIT Press, Cambridge, Mass. Robinson J. (1953), The Production Function and the Theory of Capital, in “Review of Economic Studies”, XXI, 1953-54. Robinson J. (1956), The Accumulation of Capital, London, Macmillan. Robinson J. (1967), Marginal Productivity, in “Indian Economic Review”, n.s. 2(1), April, pp.75-84. Seater, J. J. (1993) “Ricardian Equivalence”, Journal of Economic Literature 31(1): 142-190 Taylor, J. (2000) “Reassessing Discretionary Fiscal Policy”, Journal of Economic Perspectives 14(3): 21-36. Walsh, Carl E. (1995) “Optimal Contracts for Central Bankers”, American Economic Review 85(1): 150-67. Wray L. R. (1990), Money and Credit in Capitalist Economies. The Endogenous Money Approach, Aldershot, Edward Elgar. Wyplosz (2001) ed. The Impact of EMU on Europe and the Developing Countries, Oxford University Press, Oxford. Wyplosz, Charles (2005) “Fiscal Policy: Institutions versus Rules”, in National Institute Economic Review, no.191, January. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/1432 |