IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/52328.html
   My bibliography  Save this paper

Deficit Spending, Expectations, and Fiscal Policy Effectiveness

Author

Listed:
  • Cebula, Richard

Abstract

This paper develops a formal theoretical model within which it investigates mathematically the policy implications of adverse business expectations involving deficit financing. It is found that hostility towards deficit financing will always diminish the effectiveness of fiscal policy and render the ultimate impact of fiscal policy indeterminate. Potentially, a fiscal policy aimed at expansion may lead to a perverse final effect: a decline in economic activity. The model constructed allows deficit financing to influence the money supply.

Suggested Citation

  • Cebula, Richard, 1972. "Deficit Spending, Expectations, and Fiscal Policy Effectiveness," MPRA Paper 52328, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:52328
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/52328/1/MPRA_paper_52328.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Silber, William L, 1970. "Fiscal Policy in IS-LM Analysis: A Correction," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 2(4), pages 461-472, November.
    2. Jesse Burkhead, 1954. "The Balanced Budget," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 68(2), pages 191-216.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. William D. Jackson, 1976. "Determinants of long-term bond risk premiums," Working Paper 76-03, Federal Reserve Bank of Richmond.
    2. Lehment, Harmen, 1983. "The macroeconomic implications of public sector deficits," Kiel Working Papers 168, Kiel Institute for the World Economy (IfW Kiel).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cebula, Richard & Merrick, Shelley, 2002. "The Real Interest Rate Yield on Long Term Municipals: What is the Role of Budget Deficits?," MPRA Paper 58477, University Library of Munich, Germany.
    2. Hager, Sandy Brian, 2013. "Public Debt, Ownership and Power: The Political Economy of Distribution and Redistribution," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 157991, September.
    3. Pierre Duguay & Yves Rabeau, 1989. "Les effets macro-économiques de la politique budgétaire : de Keynes à la synthèse néo-classique," Revue Économique, Programme National Persée, vol. 40(4), pages 597-620.
    4. Benjamin M. Friedman, 1979. "The Determination of Long-Term Interest Rates: Implications for Monetary and Fiscal Policies," NBER Working Papers 0366, National Bureau of Economic Research, Inc.
    5. Sheikh, Munir A. & Grady, Patrick & Lapointe, Paul H., 1980. "L’efficacité de la politique budgétaire en économie ouverte," L'Actualité Economique, Société Canadienne de Science Economique, vol. 56(4), pages 499-534, octobre-d.
    6. Pierre Gravot, 1980. "Les incertitudes de la politique économique en économie ouverte," Revue Économique, Programme National Persée, vol. 31(2), pages 258-286.
    7. Shobande Olatunji Abdul, 2020. "Fiscal Rule in Africa," Open Economics, De Gruyter, vol. 3(1), pages 112-120, January.
    8. Shobande Olatunji Abdul, 2020. "Fiscal Rule in Africa," Open Economics, De Gruyter, vol. 3(1), pages 112-120, January.
    9. Bertrand Lemennicier, 1973. "La contrainte budgétaire de l'Etat et l' « Optimal Policy Mix » en régime de change fixe et flexible," Revue Économique, Programme National Persée, vol. 24(3), pages 473-504.
    10. Bischi, Gian Italo & Giombini, Germana & Travaglini, Giuseppe, 2022. "Monetary and fiscal policy in a nonlinear model of public debt," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 397-409.
    11. Hager, Sandy Brian, 2016. "Public Debt, Inequality and Power. The Making of a Modern Debt State," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 157976, December.
    12. Sharon J. Erenburg, "undated". "Linking Public Capital to Economic Performance, Public Capital: The Missing Link Between Investment and Economic Growth ," Economics Public Policy Brief Archive 14, Levy Economics Institute.
    13. Brian Motley, 1983. "Real interest rates, money and government deficits," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 31-45.
    14. V. Vance Roley, 1983. "Asset Substitutability and the Impact of Federal Deficits," NBER Working Papers 1082, National Bureau of Economic Research, Inc.
    15. Rabia Rafique & Asad Nisar & Syed Sadaqat Ali Shah, 2024. "Testing the effects of fiscal policy shocks on output growth in recession and expansion: empirical evidence from developing countries," Economic Change and Restructuring, Springer, vol. 57(3), pages 1-26, June.
    16. V. Vance Roley, 1980. "The Effect of Federal Debt Management Policy on Corporate Bond and Equity Yields," NBER Working Papers 0586, National Bureau of Economic Research, Inc.
    17. Albert Minguet, 1979. "Reform Of Public Finance Or Abandonment Of Budgetary Policies?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 50(1), pages 53-79, January.
    18. Fabrizio Balassone & Daniele Franco, 2004. "EMU fiscal rules: new answers to old questions?," Chapters, in: Giuseppe Eusepi & Friedrich Schneider (ed.), Changing Institutions in the European Union, chapter 1, Edward Elgar Publishing.
    19. Lehment, Harmen, 1983. "The macroeconomic implications of public sector deficits," Kiel Working Papers 168, Kiel Institute for the World Economy (IfW Kiel).
    20. Paweł Borys & Piotr Ciżkowicz & Andrzej Rzońca, 2014. "Panel Data Evidence on the Effects of Fiscal Policy Shocks in the EU New Member States," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 189-224, June.

    More about this item

    Keywords

    budget deficit; fiscal policy effectiveness; business expectations;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H69 - Public Economics - - National Budget, Deficit, and Debt - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:52328. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.