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Working Capital Finance and the Balanced Budget Multiplier

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  • Wen-ya Chang
  • Ching-chong Lai

Abstract

The macroeconomic literature has long agreed that the balanced budget multiplier is positive. By adopting the viewpoints of working capital finance on aggregate supply, this paper reexamines the impact of an expansion in government spending on output with a balanced government budget and finds that the balanced budget multiplier may be negative depending on the extent of the interest-sensitive aggregate supply effects.

Suggested Citation

  • Wen-ya Chang & Ching-chong Lai, 1992. "Working Capital Finance and the Balanced Budget Multiplier," The American Economist, Sage Publications, vol. 36(2), pages 61-65, October.
    • Handle: RePEc:sae:amerec:v:36:y:1992:i:2:p:61-65
    DOI: 10.1177/056943459203600208
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    References listed on IDEAS

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