Keynesian, Classical and New Keynesian Approaches to Fiscal Policy: Comparison and Critique

Thomas Palley

No 96-2012, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: The short-run macroeconomic effectiveness of fiscal policy depends on the effect of policy on AD and the effect of AD on output. This paper examines how macroeconomic perspectives (Keynesian, Post Keynesian, monetarist, classical, new classical, and new Keynesian) describe the effect of AD on output, thereby making or denying space for fiscal policy to impact output. The neo-Ricardian hypothesis (NRH) concerns the effect of bond financed deficits on AD. The NRH turns on the microeconomic behavior of households and can therefore hold in principle in both classical and Keynesian models. Recent new Keynesian arguments about fiscal policy being effective at the zero lower bound represent another capital market imperfection critique of the NRH.

Keywords: Fiscal policy; Keynesian; Post Keynesian; monetarist; classical; new Keynesian; neo-Ricardian hypothesis; zero lower bound (search for similar items in EconPapers)
JEL-codes: E6 E62 H3 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Keynesian, Classical and New Keynesian Approaches to Fiscal Policy: Comparison and Critique (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:96-2012

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