The Sector Financial Balances Model of Aggregate Demand and Austerity
6 Pages Posted: 10 Jun 2011
Date Written: June 9, 2011
This paper uses the sector financial balances model of aggregate demand to illustrate the effects of fiscal austerity policies on the economy. It further demonstrates that government deficits are not directly controllable by policy makers but are rather endogenous to the responses of the private sector to austerity policies.
Keywords: fiscal policy, government deficits, sector financial balances, aggregate demand, austerity
JEL Classification: E6, H3, H6
Suggested Citation: Suggested Citation