The Limits of Fiscal Policy

ISBN-13: 9783319901572 / Angielski / Twarda / 2018 / 121 str.

Anthony J. Makin

Opis

This book presents alternative macroeconomic perspectives, primarily open economy, on the limitations of discretionary fiscal policy, with a focus on government spending. A concluding chapter evaluates the nexus between budgetary policy and confidence, summarises the key failings of fiscal activism, and suggests fiscal policy goals.

Spis treści

Chapter 1  The Keynesian Revival 

1.1 Introduction

1.2 The G20 Fiscal Response to the GFC

1.3 Non-Keynesian Perspectives

1.3.1 Economics or Politics?

1.3.2 The Paradox of Spending

1.4 Gauging Multipliers

1.5 What Lies Ahead

Chapter 2  Macro-Foundations for Fiscal Analysis

2.1 Introduction

2.2 Macro-accounting Foundations

2.2.1 Sources of Funds

2.3 Saving, Investment and Budget Deficits

2.3.1 Budget Deficits and Government Borrowing

2.3.2 Private Investment and Saving

2.3.3 A Loanable Funds Framework

2.4 Aggregate Demand and the Keynesian Cross

2.4.1 Non-Keynesian Perspectives

2.5 Output, Absorption and the Trade Balance

2.5.1 Expenditure-Output Independence

2.6 Conclusion

Chapter 3  Budget Deficits, Public Debt and Crowding Out 

3.1 Introduction

3.2 Closed Economy Loanable Funds Framework

3.2.1 Modelling Global Financial Crises

3.2.2 Macroeconomic Policy Response

3.3 Open Economy Loanable Funds Framework

3.4 Higher Government Spending

3.4.1 Open Economy:  PCM

3.4.2 Open Economy:  ICM

3.5 Income Tax Cuts

3.6 Balanced Budget

3.7 Expected Depreciation

3.8 Conclusion

Chapter 4  Budget Deficits and National Income

4.1 Introduction

4.2 Investment, National Output and National Income

4.3 Higher Government Spending

4.3.1 Closed Economy

4.3.2 Open Economy: PCM

4.3.3 Open Economy: ICM

4.4 Income Tax Cuts

4.5 Balanced Budget

4.6 Credit Rating Downgrades and Expected Depreciation

4.7 Public Investment

4.7.1 Open Economy: PCM

4.7.2 Open Economy: ICM

4.8 Conclusion

Chapter 5  Fiscal Policy, Money and the Exchange Rate

5.1 Introduction

5.2  The Basic Model

5.2.1 The Real Sector 

5.2.2 The Monetary Sector 

5.2.3   Price Level Dynamics

5.2.4   Longer Run Adjustment

5.3.  Monetary Policy versus Fiscal Policy 

5.3.1 Monetary Stimulus 

5.3.2 Fiscal Stimulus

5.3.3 Public Investment and Business Tax  

5.4  Conclusion 

Appendix

Chapter 6  Fiscal Policy in a Dependent Economy

6.1 Introduction

6.2 The Two Sector Model

6.2.1 Expenditure and Output in the Tradable and Not-tradable Sectors

6.2.2 Monetary Relations

6.2.3 The External Accounts and Capital Mobility

6.3 Increased Government Spending

6.3.1 Higher Spending on Tradables

6.3.2 Higher Spending on Non-Tradables

6.4 Unsustainable Current Account Deficits and Fixed Exchange Rates

6.4.1 Unsustainable Current Account Deficits

6.4.2 Government Spending Under Fixed Exchange Rates: ICM

6.5 Conclusion

Chapter 7  Fiscal Consolidation

7.1 Introduction

7.2 Public Debt Sustainability

7.3 Reduced Government Spending

7.3.1 Closed Economy

7.3.2 Open Economy: PCM

7.3.3 Open Economy: ICM

7.3.5 Dependent Economy

7.3.4   Aggregate Expenditure-Output Model

7.4 Income Tax Rises

7.5 Repairing the Fiscal Accounts

7.6 Conclusion

Chapter 8  Recasting Fiscal Policy

8.1 Introduction

8.2 The Confidence Paradox

8.3 Recasting Fiscal Policy

8.4 Summing Up

Bibliography

O autorze

Anthony J Makin is Professor of Economics at Griffith University, Australia, and has previously served with the International Monetary Fund and Australian departments of Finance, Foreign Affairs and Trade and The Treasury.  He has published widely and is a member of the National Economic Panel of the Economic Society of Australia.

Blurb

This book presents alternative macroeconomic perspectives, primarily open economy, on the limitations of discretionary fiscal policy, with a focus on government spending.  Following an overview on the post-crisis Keynesian revival and of the macro-foundations needed for subsequent analysis, different perspectives are expounded that highlight the failings of fiscal activism. These perspectives include extended loanable funds analysis, an expenditure-output related model incorporating money and exchange rates, and a dependent economy framework. The approaches are used to examine investment and net export crowding out effects and their implications for national income, and are then adapted to show the macroeconomic impact of different fiscal consolidation measures, revealing that the nature of fiscal repair is critical. A concluding chapter evaluates the nexus between budgetary policy and confidence, summarises the key failings of fiscal activism, and suggests fiscal policy goals. 

The book will appeal to university lecturers and researchers in macroeconomics and economists working in government and the private sector.