Deficits, Growth, and the Current Slowdown: What Role for Fiscal Policy?
University of Piraeus
Aristotle University of Thessaloniki - Department of Economics
September 20, 2004
Journal of Post-Keynesian Economics, Vol. 26, No. 3
The hesitation of many conventional-wisdom economists to rely more aggressively on fiscal policy measures in order to keep their public finances more or less balanced may have contributed to the persisting current slowdown. We discuss the potential of active fiscal policies in stimulating growth focusing on the European experience. Recent contributions in this journal emphasized the role of expansionary fiscal policies not only during recessionary conditions but rather as a standard feature of the macroeconomic policy stance arguing that budget deficits lead to higher business profits and, therefore, economic growth. We provide evidence pointing to a positive relationship between fiscal deficits and capital profitability. We conclude that the dogmatic aversion for budget deficits may be perilous.
Number of Pages in PDF File: 9
Keywords: fiscal policy, deficits, capital profitability, Europe
JEL Classification: E600, E620Accepted Paper Series
Date posted: April 13, 2012
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo5 in 0.469 seconds