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DESTABILIZING EFFECTS ON INCOME ADJUSTMENT PROCESS WITH FISCAL POLICY LAGS
Author(s) -
Matsumoto Akio
Publication year - 2008
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.2008.00334.x
Subject(s) - lag , economics , time lag , distributed lag , government expenditure , fiscal policy , government (linguistics) , process (computing) , monetary economics , macroeconomics , econometrics , public finance , computer science , computer network , linguistics , philosophy , operating system
Since a finite time delay in government purchases of goods and service cannot be ignored, this paper studies how such a time lag in a fiscal policy affects the stability of the income adjustment process. Formulating the income adjustment process with time delay, it adopts two different approaches: one is a fixed time lag and the other is a continuously distributed lag. It is demonstrated that the continuously distributed time lag has the stronger destabilizing effect if the adjustment of the government expenditure is slow while the fixed lag has the stronger destabilizing effect if this adjustment is rapid.