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Deficits, Monetary Policy, and Real Economic Activity

In: The Economics of Public Debt

Author

Listed:
  • Robert Eisner

    (Northwestern University)

  • Paul J. Pieper

    (University of Illinois)

Abstract

The coincidence in the 1970s of apparently large, structural federal deficits, substantial and growing unemployment and inflation rising to double-digit levels brought widespread questioning of the hitherto dominant Keynesian paradigm. Indeed, Robert Lucas (Lucas and Sargent, 1978; Lucas, 1981) indicated this coincidence as a motivation for his own rejection of that paradigm and search for new macroeconomic theory. In short, he explained, the Keynesian model suggested that expansive fiscal and monetary policies might cause some inflation but would reduce unemployment. But to the contrary, he indicated, these policies begot accelerating inflation and high unemployment.

Suggested Citation

  • Robert Eisner & Paul J. Pieper, 1988. "Deficits, Monetary Policy, and Real Economic Activity," International Economic Association Series, in: Kenneth J. Arrow & Michael J. Boskin (ed.), The Economics of Public Debt, chapter 1, pages 3-40, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-19459-9_1
    DOI: 10.1007/978-1-349-19459-9_1
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    Citations

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    Cited by:

    1. Robert Eisner, 1994. "Deficits, Saving, and Economic Policy," The American Economist, Sage Publications, vol. 38(2), pages 3-11, October.
    2. Maria Carme Riera i Prunera, 2003. "Deficit, human capital and economic growth dynamics," Working Papers in Economics 102, Universitat de Barcelona. Espai de Recerca en Economia.
    3. Riera Prunera, Maria Carmen, 2000. "A Role For Deficit In Economic Growth," ERSA conference papers ersa00p335, European Regional Science Association.

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