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The Case for Fiscal Policy

In: Financial Developments in National and International Markets

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  • Philip Arestis
  • Malcolm Sawyer

Abstract

The case for fiscal policy and for governments to manipulate on their budgets as appropriate with the specific objective of achieving high levels of employment arises from Kaleckian and Keynesian propositions. Put simply, the latter argue that no market mechanisms are in place to ensure that the level of aggregate demand is sufficient for high levels of economic activity (Kalecki, 1939; Keynes, 1936). Even so, many lines of argument have been developed to the effect that budget deficits and fiscal policy are ineffectual and/or have undesired (and undesirable) effects. Indeed, a great deal of work has been undertaken recently on the significance of fiscal consolidation. Countries only have to balance their budgets, run surpluses during the upswing, and expansion is in place (we have rehearsed and rejected many of these arguments in Arestis and Sawyer, 2003).

Suggested Citation

  • Philip Arestis & Malcolm Sawyer, 2006. "The Case for Fiscal Policy," Palgrave Macmillan Books, in: Philip Arestis & Jesus Ferreiro & Felipe Serrano (ed.), Financial Developments in National and International Markets, chapter 6, pages 103-117, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-52237-4_6
    DOI: 10.1057/9780230522374_6
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    References listed on IDEAS

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    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Chadha, Jagjit S & Dimsdale, Nicholas H, 1999. "A Long View of Real Rates," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 15(2), pages 17-45, Summer.
    3. Philip Arestis & Malcolm Sawyer, 2005. "Reinventing Fiscal Policy," Palgrave Macmillan Books, in: Blandine Laperche & Dimitri Uzunidis (ed.), John Kenneth Galbraith and the Future of Economics, chapter 9, pages 105-125, Palgrave Macmillan.
    4. Barro, Robert J, 1989. "The Ricardian Approach to Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 37-54, Spring.
    5. Gerald P. Dwyer & Rik Hafer, 1998. "The federal government's budget surplus: Cause for celebration?," Economic Review, Federal Reserve Bank of Atlanta, vol. 83(Q 3), pages 42-51.
    6. Wynne Godley, "undated". "Fiscal Policy To The Rescue," Economics Policy Note Archive 01-1, Levy Economics Institute.
    7. Hyman P. Minsky, 1991. "Financial Crises: Systemic or Idiosyncratic," Economics Working Paper Archive wp_51, Levy Economics Institute.
    8. Buiter, Willem H, 2001. "Notes on 'A Code for Fiscal Stability.'," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 1-19, January.
    9. Philip Arestis & Malcolm Sawyer, 2002. "Can Monetary Policy Affect The Real Economy?," Macroeconomics 0209012, University Library of Munich, Germany.
    10. Marco BUTI & Daniele FRANCO & Hedwig ONGENA, 1997. "Budgeetary Policies during Recessions : Retrospective Application of the Stability and Growth Pact” to the Post-War Period," Discussion Papers (REL - Recherches Economiques de Louvain) 1997041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    11. Wynne Godley, 1999. "Seven Unsustainable Processes: Medium-Term Prospects and Policies for the United States and the World," Economics Strategic Analysis Archive 99-10, Levy Economics Institute.
    12. Anthony J. Laramie & Douglas Mair, 2000. "A Dynamic Theory of Taxation," Books, Edward Elgar Publishing, number 1349.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Bevan or Thatcher: who's relevant?
      by chris dillow in Stumbling and Mumbling on 2008-09-26 16:51:45

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    Cited by:

    1. Antonio Afonso & Hüseyin Sen & Ayse Kaya, 2021. "Government Size, Unemployment and Inflation Nexus in Eight Large Emerging Market Economies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 235(1), pages 133-170, March.
    2. Pavlina R. Tcherneva, 2008. "The Return of Fiscal Policy: Can the New Developments in the New Economic Consensus Be Reconciled with the Post-Keynesian View?," Economics Working Paper Archive wp_539, Levy Economics Institute.
    3. Angel Asensio, 2008. "(Post) Keynesian alternative to inflation targeting," Post-Print halshs-00335560, HAL.
    4. Jean-Marie Monnier & Bruno Tinel, 2006. "Public debt and redistribution in France (1980 – 2004) [Endettement public et redistribution en France de 1980 à 2004]," Post-Print halshs-00084093, HAL.
    5. Jean-Marie Monnier & Bruno Tinel, 2006. "Endettement public et redistribution en France de 1980 à 2004," Cahiers de la Maison des Sciences Economiques r06006, Université Panthéon-Sorbonne (Paris 1).

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    More about this item

    Keywords

    Interest Rate; Monetary Policy; Central Bank; Fiscal Policy; Real Wage;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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