 A note on the sustainability of full employment in the presence of budget deficitsReview of Political Economy, 2016, vol. 28, issue 1, 79-89 Abstract: In a recent issue of this journal, Tymoigne and Wray, as well as Palley, discussed whether economies can experience stable full-employment equilibria with persistent public budget deficits. This implies continuous growth of a stock-variable: high-powered money and/or government bonds in the hands of the private sector. Their discussion assumed a stationary state. The question is whether such a situation can be regarded as sustainable over time. This paper argues that a satisfactory solution to the problem can be found only by abandoning the hypothesis of stationary state and considering the effects that different compositions of public expenditure have on the rate of growth. To have a stable full-employment equilibrium with budget deficits, the economy must grow. Since the economy is assumed to be in full employment, the growth of aggregate output must be entirely due to the growth of productivity, which can be realized by changing the composition of public spending in favor of productive expenditures. Date: 2016 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:revpoe:v:28:y:2016:i:1:p:79-89 Ordering information: This journal article can be ordered from DOI: 10.1080/09538259.2015.1101828 Access Statistics for this article Review of Political Economy is currently edited by Steve Pressman and Louis-Philippe Rochon More articles in Review of Political Economy from Taylor & Francis Journals |
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