This paper considers the possible theoretical validity of the following "monetarist hypothesis": that a constant, positive government budget deficit can be maintained permanently and without inflation if it is financed by the issue of bonds rather than money. The question is studied in a...

Because of the restrictive assumptions required to establish the theory of Ricardian equivalence, its relevance in practice is essentially an empirical question. The strongest direct evidence in favor of Ricardian equivalence is Roger Kormendi's (1983) article in the American Economic Review....

The present paper shows how a negative fiscal multiplier is possible in a two-sector economy that is otherwise similar to the traditional one-sector Keynesian analysis. The key to this surprising possibility is that an increased budget deficit changes the sectoral balance of demand. A reduction...

This paper examines three sources of the fluctuations in real interest rates during the past three decades: changes in budget deficits, changes in tax rules, and changes in monetary policy. The evidence indicates that budget deficits and monetary policy have had a strong influence on the level...

The paper surveys a number of neo-classical and neo-Keynesian approcaches to government financial policy. After reviewing the very restrictive conditions under which financial policy is just a veil without real consequences, non-neutral financial policy in neo-classical models is analyzed. At...

This paper deals with the international transmission of the effects of budget deficits on world rates of interest and spending. The model assumes a two-country world within which capital markets are integrated, individuals behave rationally, and the behavior of individuals and governments are...

The evidence presented in this paper indicates that changes in government spending, transfers and taxes can have substantial effects on aggregate demand. The estimates also indicate that the promise of future social security benefits significantly reduces private saving. Each of the basic...

This paper offers a possible explanation for the existence of continual government budget deficits such as experienced in a number of industrialized countries in recent years. Based on the assumption that higher tax rates cause more intensive tax-aversion behavior (tax avoidance and tax...

This paper develops a political-economic model of fiscal policy - one in which government resources are a common property' out of which interest groups can finance expenditures on their preferred items. This setup has striking macroeconomic implications. Transfers are higher than a benevolent...

This paper analyses the effects of fiscal policies on rates of interest and wealth in the world economy. Uncertainty concerning the length of life yields an equilibrium in which private and social rates of discount differ and budget deficits exert real effects. It is shown that a current budget...