This paper focuses on growth enhancing budget-neutral fiscal reforms, i.e. changes in the composition of government revenues and spending that stimulate GDP growth while keeping the ratio of the fiscal budget to GDP constant. To this aim, we present simulation results using a multi-country DSGE model with three large economic regions, the US, the euro area and the rest of the world. The model features constrained and unconstrained non-Ricardian households and a detailed government sector; its multi-country nature allows investigating cross-country spillovers. The paper focuses on the most growth-friendly budget-neutral fiscal measures: (i) an incomplete fiscal devaluation (ii) a rise in government investment compensated by a fall in government consumption and (iii) a rise in government investment compensated by a rise in consumption and labor taxes. Dampening or amplifying effects due to coordination across policies (monetary and fiscal) and across economic regions are also considered. Three main results stand out. First, an increase in government investment financed by rising less distortionary taxes appears to be an effective growth-friendly budget-neutral reform in the sense that it generates both short- and long-run GDP growth and improves fiscal sustainability. Second, benefits and costs of budget-neutral reforms are not equally distributed across agents, giving rise to a policy trade-off between growth and distributional consequences. Third, budget-neutral reforms do not have large cross-border trade spillovers; however, reforms coordinated across all countries in periods of accommodative monetary policy do have amplified domestic effects.
{"title":"Can Fiscal Budget-Neutral Reforms Stimulate Growth? Model-Based Results","authors":"M. Bussière, L. Ferrara, M. Juillard, D. Siena","doi":"10.2139/ssrn.2955120","DOIUrl":"https://doi.org/10.2139/ssrn.2955120","url":null,"abstract":"This paper focuses on growth enhancing budget-neutral fiscal reforms, i.e. changes in the composition of government revenues and spending that stimulate GDP growth while keeping the ratio of the fiscal budget to GDP constant. To this aim, we present simulation results using a multi-country DSGE model with three large economic regions, the US, the euro area and the rest of the world. The model features constrained and unconstrained non-Ricardian households and a detailed government sector; its multi-country nature allows investigating cross-country spillovers. The paper focuses on the most growth-friendly budget-neutral fiscal measures: (i) an incomplete fiscal devaluation (ii) a rise in government investment compensated by a fall in government consumption and (iii) a rise in government investment compensated by a rise in consumption and labor taxes. Dampening or amplifying effects due to coordination across policies (monetary and fiscal) and across economic regions are also considered. Three main results stand out. First, an increase in government investment financed by rising less distortionary taxes appears to be an effective growth-friendly budget-neutral reform in the sense that it generates both short- and long-run GDP growth and improves fiscal sustainability. Second, benefits and costs of budget-neutral reforms are not equally distributed across agents, giving rise to a policy trade-off between growth and distributional consequences. Third, budget-neutral reforms do not have large cross-border trade spillovers; however, reforms coordinated across all countries in periods of accommodative monetary policy do have amplified domestic effects.","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117180257","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Legislative Budget Offices are a core element in the movement towards enhancing transparency and accountability in the fiscal process. Yet they are fragile institutions that must continually defend their position in the budget process through analytical rigour and nonpartisanship. When they do come under attack, the consequences for the fiscal process are singularly dire. That is why, in an era of “alternative facts” and “post-truth” nostrums, the viability of the American Congressional Budget Office (CBO) requires revisitation. This paper considers the text of remarks from a hostile American political figure against the CBO (Gingrich, 2017), to reexamine an emergent question in budgetary philosophy: is a Legislative Budget Office compatible with the nostrums of an “alternative facts” and post-Truth era?
{"title":"Is a Legislative Budget Office Compatible with the Nostrums of an 'Alternative-Facts' and Post-Truth Era?","authors":"Usman W. Chohan","doi":"10.2139/SSRN.2923780","DOIUrl":"https://doi.org/10.2139/SSRN.2923780","url":null,"abstract":"Legislative Budget Offices are a core element in the movement towards enhancing transparency and accountability in the fiscal process. Yet they are fragile institutions that must continually defend their position in the budget process through analytical rigour and nonpartisanship. When they do come under attack, the consequences for the fiscal process are singularly dire. That is why, in an era of “alternative facts” and “post-truth” nostrums, the viability of the American Congressional Budget Office (CBO) requires revisitation. This paper considers the text of remarks from a hostile American political figure against the CBO (Gingrich, 2017), to reexamine an emergent question in budgetary philosophy: is a Legislative Budget Office compatible with the nostrums of an “alternative facts” and post-Truth era?","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123687405","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
B. Clapham, P. Gomber, Martin Haferkorn, Sven Panz
We investigate different designs of circuit breakers implemented on European trading venues and examine their effectiveness to manage excess volatility and to preserve liquidity. Specifically, we empirically analyze volatility and liquidity around volatility interruptions implemented on the German and Spanish stock market which differ regarding specific design parameters. We find that volatility interruptions in general significantly decrease volatility in the post interruption phase. Unfortunately, this decrease in volatility comes at the cost of decreased liquidity. Regarding design parameters, we find tighter price ranges and shorter durations to support volatility interruptions in achieving their goals.
{"title":"Managing Excess Volatility: Design and Effectiveness of Circuit Breakers","authors":"B. Clapham, P. Gomber, Martin Haferkorn, Sven Panz","doi":"10.2139/ssrn.2910977","DOIUrl":"https://doi.org/10.2139/ssrn.2910977","url":null,"abstract":"We investigate different designs of circuit breakers implemented on European trading venues and examine their effectiveness to manage excess volatility and to preserve liquidity. Specifically, we empirically analyze volatility and liquidity around volatility interruptions implemented on the German and Spanish stock market which differ regarding specific design parameters. We find that volatility interruptions in general significantly decrease volatility in the post interruption phase. Unfortunately, this decrease in volatility comes at the cost of decreased liquidity. Regarding design parameters, we find tighter price ranges and shorter durations to support volatility interruptions in achieving their goals.","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-02-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115866003","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I investigate whether and how initial conditions around loan origination influence private debt renegotiation process. I model the renegotiation likelihood, and the conditional probability of multiple renegotiation rounds or multiple amended terms using a sequential logit model. I use a large sample of 15,000 loans on the European credit market. I find that contractual (covenants and collateral) and organizational (lenders pool size, reputation and relationship) mechanisms mitigating adverse selection and moral hazard risks have the largest and positive economic impacts. Lenders financial conditions (capitalization and credit portfolio exposure) and institutional arrangement aiming at creditors protection significantly impact the renegotiation process.
{"title":"Initial Conditions and the Private Debt Renegotiation Process","authors":"Christophe J. Godlewski","doi":"10.2139/ssrn.2910032","DOIUrl":"https://doi.org/10.2139/ssrn.2910032","url":null,"abstract":"I investigate whether and how initial conditions around loan origination influence private debt renegotiation process. I model the renegotiation likelihood, and the conditional probability of multiple renegotiation rounds or multiple amended terms using a sequential logit model. I use a large sample of 15,000 loans on the European credit market. I find that contractual (covenants and collateral) and organizational (lenders pool size, reputation and relationship) mechanisms mitigating adverse selection and moral hazard risks have the largest and positive economic impacts. Lenders financial conditions (capitalization and credit portfolio exposure) and institutional arrangement aiming at creditors protection significantly impact the renegotiation process.","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133962859","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract A sustained sizeable deficit budget is problematic for Sri Lanka. Since 1980 to 2014, the Sri Lankan government budget deficit averaged 8.75% of GDP, and recorded the highest ratio of 19.2% of GDP in 1980 (Central Bank Annual reports, 1980-2014). This study examines the association with budget deficit and selected macroeconomic variables in Sri Lanka, using annual time series data for post-liberalization period; 1980-2014. The selected explanatory macroeconomic variables are inflation, interest rate, exchange rate, debt, and real GDP growth rate. Specifically, the study seeks to ascertain the relation-ship between selected macroeconomic variables and the budget deficit with a view to making appropriate recommendations to curb its negative effect to economy. The study carried 210 samples, and for examination of long-run relationship ARDL bounds test technique is applied, and short-run dynamic was examined using the ARDL Granger-Causality test. Further, Granger Causality test was carried out to determine the causality between selected variables and budget deficit, whether the impact were uni or bi- directional. The results revealed that there is a long-run relationship between budget deficit, inflation, interest rate, exchange rate, debts and real GDP growth rate in Sri Lanka. Further, in this study uni-directional relationship was confirmed between budget deficit and debts. The budget deficit cause debt. Additionally, a uni-directional relationship was also identified between budget deficit and inflation. The budget deficit cause inflation. Moreover, this study confirmed there were no uni or bi direction causality between other selected variables; Interest rate, Exchange, Real GDP growth rate and Budget deficit. Furthermore, the findings show that budget deficit has a meaningful effect on inflation, and debts. The paper recommended that the Sri Lankan government should take actions to control inflation to maintain price stability and to minimize the debts because the government is maintaining a sizable deficit budget since 1957. This research contributes to the idea that there are dimensional and dynamic factors involved between budget deficit and macroeconomic variables that require comprehensive knowledge to increase productivity, improve living standards, and ensure stability of the economic system. Keyword: Budget Deficit, Macroeconomic Variables, Granger Causality Test
对斯里兰卡来说，持续的巨额赤字预算是个问题。1980年至2014年，斯里兰卡政府预算赤字占GDP的比例平均为8.75%，最高的是1980年的19.2% (Central Bank Annual reports, 1980-2014)。本研究考察了预算赤字和选定的宏观经济变量在斯里兰卡的关系，使用年度时间序列数据后自由化时期;1980 - 2014。所选择的解释性宏观经济变量是通货膨胀、利率、汇率、债务和实际GDP增长率。具体地说，这项研究力求确定选定的宏观经济变量与预算赤字之间的关系，以期提出适当的建议，以遏制其对经济的不利影响。本研究共纳入210个样本，长期关系检验采用ARDL界检验技术，短期动态关系检验采用ARDL Granger-Causality检验。进一步，通过格兰杰因果检验来确定所选变量与预算赤字之间的因果关系，以及影响是单向的还是双向的。结果表明，斯里兰卡的预算赤字、通货膨胀、利率、汇率、债务和实际GDP增长率之间存在长期关系。进一步，本研究证实了预算赤字与债务之间的单向关系。预算赤字导致债务。此外，预算赤字与通货膨胀之间也存在单向关系。预算赤字导致通货膨胀。此外，本研究证实，其他选择的变量之间没有单向或双向因果关系;利率、汇率、实际GDP增长率和预算赤字。此外，研究结果表明，预算赤字对通货膨胀和债务有显著影响。该论文建议，斯里兰卡政府应该采取措施控制通货膨胀，以保持物价稳定，并尽量减少债务，因为政府自1957年以来一直保持着相当大的赤字预算。该研究提出了预算赤字与宏观经济变量之间存在维度和动态因素的观点，这些因素需要全面的知识来提高生产力，改善生活水平，并确保经济系统的稳定。关键词:预算赤字宏观经济变量格兰杰因果检验
{"title":"Identifying the Relationships between Budget Deficit and Selected Macroeconomic Variables: A Study of Sri Lanka During the Postliberalization Era","authors":"D. Dissanayake","doi":"10.2139/ssrn.2910354","DOIUrl":"https://doi.org/10.2139/ssrn.2910354","url":null,"abstract":"Abstract A sustained sizeable deficit budget is problematic for Sri Lanka. Since 1980 to 2014, the Sri Lankan government budget deficit averaged 8.75% of GDP, and recorded the highest ratio of 19.2% of GDP in 1980 (Central Bank Annual reports, 1980-2014). This study examines the association with budget deficit and selected macroeconomic variables in Sri Lanka, using annual time series data for post-liberalization period; 1980-2014. The selected explanatory macroeconomic variables are inflation, interest rate, exchange rate, debt, and real GDP growth rate. Specifically, the study seeks to ascertain the relation-ship between selected macroeconomic variables and the budget deficit with a view to making appropriate recommendations to curb its negative effect to economy. The study carried 210 samples, and for examination of long-run relationship ARDL bounds test technique is applied, and short-run dynamic was examined using the ARDL Granger-Causality test. Further, Granger Causality test was carried out to determine the causality between selected variables and budget deficit, whether the impact were uni or bi- directional. The results revealed that there is a long-run relationship between budget deficit, inflation, interest rate, exchange rate, debts and real GDP growth rate in Sri Lanka. Further, in this study uni-directional relationship was confirmed between budget deficit and debts. The budget deficit cause debt. Additionally, a uni-directional relationship was also identified between budget deficit and inflation. The budget deficit cause inflation. Moreover, this study confirmed there were no uni or bi direction causality between other selected variables; Interest rate, Exchange, Real GDP growth rate and Budget deficit. Furthermore, the findings show that budget deficit has a meaningful effect on inflation, and debts. The paper recommended that the Sri Lankan government should take actions to control inflation to maintain price stability and to minimize the debts because the government is maintaining a sizable deficit budget since 1957. This research contributes to the idea that there are dimensional and dynamic factors involved between budget deficit and macroeconomic variables that require comprehensive knowledge to increase productivity, improve living standards, and ensure stability of the economic system. Keyword: Budget Deficit, Macroeconomic Variables, Granger Causality Test","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-12-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116804988","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We analyze whether performance budgeting, budget transparency and medium-term expenditure frameworks are associated with the predicted moderation in the increase in the public debt-to-GDP ratio in OECD countries between 2008 and 2014. We find these countries naturally separate into two groups with different fiscal trajectories, but there is considerable heterogeneity within both groups in their use of the procedures. Notably, Belgium, Hungary and Norway present good fiscal trajectories but low levels of budget procedure use. Here, insights from political economy contribute little as the three countries fail to adhere to most of the rules deemed necessary for fiscal discipline. However, they present several common features: decentralized decision-making; distinct organizational climate governing budget administration; and, heavy reliance on agencies/public-private bodies. A standard package for enhancing fiscal performance does not therefore seem to exist, rather countries selectively adopt budget procedures to match their resources and institutions.
{"title":"Budget Procedures and Fiscal Performance: Evidence from OECD Countries in the Wake of the Crisis","authors":"Yulia Kasperskaya, Ramon Xifré","doi":"10.2139/ssrn.2900939","DOIUrl":"https://doi.org/10.2139/ssrn.2900939","url":null,"abstract":"We analyze whether performance budgeting, budget transparency and medium-term expenditure frameworks are associated with the predicted moderation in the increase in the public debt-to-GDP ratio in OECD countries between 2008 and 2014. We find these countries naturally separate into two groups with different fiscal trajectories, but there is considerable heterogeneity within both groups in their use of the procedures. Notably, Belgium, Hungary and Norway present good fiscal trajectories but low levels of budget procedure use. Here, insights from political economy contribute little as the three countries fail to adhere to most of the rules deemed necessary for fiscal discipline. However, they present several common features: decentralized decision-making; distinct organizational climate governing budget administration; and, heavy reliance on agencies/public-private bodies. A standard package for enhancing fiscal performance does not therefore seem to exist, rather countries selectively adopt budget procedures to match their resources and institutions.","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-11-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130174011","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sovereigns are unique market participants in the global financial system, and sovereign debt markets largely operate in a legal and regulatory void. As a result, sovereign finance is a laboratory for contractual and institutional design, which raises unique challenges and opportunities. This Article adds an important and timely perspective by examining the concept of equity in sovereign debt finance. Governments, unlike corporations, rely almost exclusively on debt to finance their investments and operations. GDP-linked securities, which provide interest payments indexed to the sovereign issuer’s rate of growth, are sovereign debt instruments with certain equity-like characteristics. This Article considers whether innovation towards sovereign equity can help mitigate problems associated with sovereign debt crises. To address this question, we analyze the use of GDP-linked securities in recent sovereign debt restructurings by Argentina and Greece. Drawing on this analysis, we explore more broadly the legal implications of sovereign equity, and conclude that these applications offer opportunities to help manage sovereign finance in the absence of international financial regulation.
{"title":"Towards Sovereign Equity","authors":"S. Park, Tim R. Samples","doi":"10.2139/ssrn.2630772","DOIUrl":"https://doi.org/10.2139/ssrn.2630772","url":null,"abstract":"Sovereigns are unique market participants in the global financial system, and sovereign debt markets largely operate in a legal and regulatory void. As a result, sovereign finance is a laboratory for contractual and institutional design, which raises unique challenges and opportunities. This Article adds an important and timely perspective by examining the concept of equity in sovereign debt finance. Governments, unlike corporations, rely almost exclusively on debt to finance their investments and operations. GDP-linked securities, which provide interest payments indexed to the sovereign issuer’s rate of growth, are sovereign debt instruments with certain equity-like characteristics. This Article considers whether innovation towards sovereign equity can help mitigate problems associated with sovereign debt crises. To address this question, we analyze the use of GDP-linked securities in recent sovereign debt restructurings by Argentina and Greece. Drawing on this analysis, we explore more broadly the legal implications of sovereign equity, and conclude that these applications offer opportunities to help manage sovereign finance in the absence of international financial regulation.","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-11-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127945791","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Could a Puerto Rico-style financial crisis hit a Canadian province. In this previously unpublished update to my 2012 analysis of Canadian provincial default risks, I compare fiscal conditions in Ontario and Quebec with those of Puerto Rico and neighboring US states. I also propose the use of cone diagrams to visualize the range of possible fiscal outcomes in Canadian provinces.
{"title":"Grappling with Provincial Debts and Deficits","authors":"Marc D. Joffe","doi":"10.2139/ssrn.2868221","DOIUrl":"https://doi.org/10.2139/ssrn.2868221","url":null,"abstract":"Could a Puerto Rico-style financial crisis hit a Canadian province. In this previously unpublished update to my 2012 analysis of Canadian provincial default risks, I compare fiscal conditions in Ontario and Quebec with those of Puerto Rico and neighboring US states. I also propose the use of cone diagrams to visualize the range of possible fiscal outcomes in Canadian provinces.","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-11-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115943489","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Burnside and Dollar (2000) conclude aid promotes growth in the presence of sound policies. Easterly et al. (2004) overturn this result. We revisit this highly debated topic with updated data. Our results overturn Burnside and Dollar’s original findings by simply using new data over the same countries and years. Additional tests indicate that the original results are mainly sample driven. Marginal effects from a long-run sample (1962-2013) and post-Cold War (1990-2013) dataset suggest aid may decrease growth at any level of policy. Collectively, the results do not support a positive role of aid on growth, conditional on good policies.
{"title":"Aid, Policies and Growth: Revisiting with New Data","authors":"Shaomeng Jia, Claudia R. Williamson","doi":"10.2139/ssrn.2841926","DOIUrl":"https://doi.org/10.2139/ssrn.2841926","url":null,"abstract":"Burnside and Dollar (2000) conclude aid promotes growth in the presence of sound policies. Easterly et al. (2004) overturn this result. We revisit this highly debated topic with updated data. Our results overturn Burnside and Dollar’s original findings by simply using new data over the same countries and years. Additional tests indicate that the original results are mainly sample driven. Marginal effects from a long-run sample (1962-2013) and post-Cold War (1990-2013) dataset suggest aid may decrease growth at any level of policy. Collectively, the results do not support a positive role of aid on growth, conditional on good policies.","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-09-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115751042","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The downfall of Keynesian economics resulted from it being blamed for the inflation of the 1970s. In part this is because it had an inadequate theory of what caused inflation, having relied too heavily on the Phillips curve -- an idea found nowhere in Keynes' writings. In fact, Keynes was very clear that deficits caused inflation and budget surpluses were the cure. He was also well aware of the connection between deficits and monetary policy. Those who accuse Keynes of being weak on inflation are quite wrong, although the same cannot necessarily be said of his followers. Keynesian economics was also blamed for the failure of counter-cyclical policy, which became derided as fine-tuning. In fact, there are serious institutional and political problems that plague counter-cyclical policies, ironically causing them to be pro-cyclical.
{"title":"Inflation: The Downfall of Keynesian Economics","authors":"B. Bartlett","doi":"10.2139/ssrn.2839590","DOIUrl":"https://doi.org/10.2139/ssrn.2839590","url":null,"abstract":"The downfall of Keynesian economics resulted from it being blamed for the inflation of the 1970s. In part this is because it had an inadequate theory of what caused inflation, having relied too heavily on the Phillips curve -- an idea found nowhere in Keynes' writings. In fact, Keynes was very clear that deficits caused inflation and budget surpluses were the cure. He was also well aware of the connection between deficits and monetary policy. Those who accuse Keynes of being weak on inflation are quite wrong, although the same cannot necessarily be said of his followers. Keynesian economics was also blamed for the failure of counter-cyclical policy, which became derided as fine-tuning. In fact, there are serious institutional and political problems that plague counter-cyclical policies, ironically causing them to be pro-cyclical.","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2016-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131156384","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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