The evolution of fiscal policy theory and the Eurozone

Rosaria Rita Canale

Rivista Internazionale di Scienze Sociali, 2019, vol. 127, issue 2, 173-194

Abstract: This paper is devoted to fiscal policy theory and to how its evolution influenced the policy principles implemented from the end of the WWII to nowadays. It shows how the theoretical foundations evolved, from the Keynesian theory according to which public expenditure was conceived as an instrument to sustain aggregate demand and achieve full employment, to the present theoretical framework in which, following the intertemporal approach, it has been downgraded to an external shock. After the occurrence of the great financial crisis a new process of revision started, according to which, in times of declining macroeconomic conditions, fiscal policy has not only short-run effects on income, but also long run effects on potential output. However, it did not yet translate into a new role for fiscal policy at least in the Eurozone.

Keywords: Fiscal policy; Keynesian approach; Intertemporal approach; Public finance; Eurozone (search for similar items in EconPapers)
JEL-codes: B22 E62 F45 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:vep:journl:y:2019:v:127:i:2:p:173-194

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