On the Ineffectiveness of Fiscal Policy as an Instrument of Macroeconomic Policy

3 Pages Posted: 27 Apr 2009

See all articles by Tim Congdon

Tim Congdon

Institute of Economic Affairs (IEA)

Abstract

Spending depends on the quantity of money. If an increase in the budget deficit is financed by sales of government debt to non-banks, the quantity of money is unchanged and public borrowing crowds out private spending. But if the government finances its deficit (or buybacks of existing debt) from the banks the quantity of money, and hence spending and national income increase.

Suggested Citation

Congdon, Tim, On the Ineffectiveness of Fiscal Policy as an Instrument of Macroeconomic Policy. Economic Affairs, Vol. 29, Issue 1, pp. 80-82, March 2009, Available at SSRN: https://ssrn.com/abstract=1375956 or http://dx.doi.org/10.1111/j.1468-0270.2009.01873.x

Tim Congdon (Contact Author)

Institute of Economic Affairs (IEA) ( email )

2 Lord North Street
London SW1P 3LB
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
3
Abstract Views
271
PlumX Metrics