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Destabilizing Effects On Income Adjustment Process With Fiscal Policy Lags

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  • Akio Matsumoto

Abstract

Since a finite time delay in government purchases of goods and service cannot be ignored, this paper studies how such a time lag in a fiscal policy affects the stability of the income adjustment process. Formulating the income adjustment process with time delay, it adopts two different approaches: one is a fixed time lag and the other is a continuously distributed lag. It is demonstrated that the continuously distributed time lag has the stronger destabilizing effect if the adjustment of the government expenditure is slow while the fixed lag has the stronger destabilizing effect if this adjustment is rapid.

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  • Akio Matsumoto, 2008. "Destabilizing Effects On Income Adjustment Process With Fiscal Policy Lags," Metroeconomica, Wiley Blackwell, vol. 59(4), pages 713-735, November.
    • Handle: RePEc:bla:metroe:v:59:y:2008:i:4:p:713-735
    DOI: 10.1111/j.1467-999X.2008.00334.x
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    References listed on IDEAS

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    1. Yoshida, Hiroyuki & Asada, Toichiro, 2007. "Dynamic analysis of policy lag in a Keynes-Goodwin model: Stability, instability, cycles and chaos," Journal of Economic Behavior & Organization, Elsevier, vol. 62(3), pages 441-469, March.
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    Cited by:

    1. Akio Matsumoto & Ferenc Szidarovszky, 2016. "Delay Dynamics in a Classical IS-LM Model with Tax Collections," Metroeconomica, Wiley Blackwell, vol. 67(4), pages 667-697, November.
    2. Igor Kotlán & Zuzana Machová, 2014. "Horizont daňové politiky v zemích OECD [Tax Policy Horizon in the OECD Countries]," Politická ekonomie, Prague University of Economics and Business, vol. 2014(2), pages 161-173.
    3. De Cesare, Luigi & Sportelli, Mario, 2012. "Fiscal policy lags and income adjustment processes," Chaos, Solitons & Fractals, Elsevier, vol. 45(4), pages 433-438.
    4. Veronika Nálepová, 2017. "Affects Corporate Taxation Economic Growth? - Dynamic Approach for OECD Countries," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 3(2), pages 132-147.
    5. Sportelli, Mario & De Cesare, Luigi, 2019. "Fiscal policy delays and the classical growth cycle," Applied Mathematics and Computation, Elsevier, vol. 354(C), pages 9-31.

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