The Macroeconomic Theory of Fiscal Policy II

Toshihiro Ihori
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Toshihiro Ihori: National Gradual Institute for Policy Studies

Chapter 3 in Principles of Public Finance, 2017, pp 53-75 from Springer

Abstract: Abstract In this chapter, we investigate the multiplier of government spending using a neoclassical macroeconomic model. In the neoclassical model, households behave rationally over time so that they may anticipate future economic conditions, including future fiscal policy, and current fiscal policy. Thus, when current government spending changes, the way in which it affects future fiscal variables has an important policy implication. In this situation, the notion of a permanent level of fiscal variables becomes useful. First, let us explain this notion.

Keywords: Permanent level of fiscal variable; Government budget constraint; Permanent income hypothesis; Temporary expansion; Permanent expansion; Substitutability between private consumption and public spending (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-981-10-2389-7_3

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DOI: 10.1007/978-981-10-2389-7_3

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