Alternative U.S. Monetary and Deficit Reduction Policies for the 1980 s

C Richard Long and Mark L Gardner

Journal of Money, Credit and Banking, 1988, vol. 20, issue 3, 336-52

Abstract: The authors have developed a thirty-six-equation econometric model to measure the effects of deficit reduction policies. The model features endogenous explanations of the money stock (through the Federal budget constraint), the price level, and the capital stock, and includes wealth in the consumption and money demand functions. The authors conducted two groups of five simulations for the 1980-85 period. The capital stock was endogenous in the first group and exogenous in the second group. Negative crowding in with an endogenous capital stock made deficit reduction policies without offsetting stimulus elsewhere costly. Supply-side effects played a decisive role in the simulations. Copyright 1988 by Ohio State University Press.

Date: 1988
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