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FISCAL POLICIES IN AN INTERTEMPORAL DISEQUILIBRIUM MACROECONOMIC MODEL
Author(s) -
Fender John,
Moon Naehee
Publication year - 1993
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.1467-8586.1993.tb00559.x
Subject(s) - economics , disequilibrium , fiscal policy , macroeconomics , monetary economics , constraint (computer aided design) , budget constraint , investment (military) , consumption (sociology) , government spending , keynesian economics , macroeconomic model , current account , bond , microeconomics , finance , exchange rate , market economy , medicine , mechanical engineering , social science , sociology , politics , political science , law , ophthalmology , welfare , engineering
A two‐period macroeconomic model where consumption and investment decisions are given microeconomic foundations is presented. The model is used to analyse the effects of both current and anticipated fiscal expansion; careful attention is paid to the implications of the government's intertemporal budget constraint. It is shown that anticipated fiscal expansion may, in certain circumstances, be expansionary. Also, current fiscal expansion, if financed by bonds which are retired through future money creation, may be contractionary.