EconPapers    
Economics at your fingertips  
 

Optimum Fiscal Policy when Monetary Policy is Bound by a Rule: Ramsey Redux

Edmund Phelps and Kumaraswamy Velupillai
Additional contact information
Kumaraswamy Velupillai: Aalborg University Center

Chapter 4 in The Economics of Public Debt, 1988, pp 116-130 from Palgrave Macmillan

Abstract: Abstract The Keynesian revolution, whatever Keynes’s own views, fostered the precept that fiscal policy — the determination of government spending and taxation — should be put at the service of employment stabilisation. This calls for ‘functional finance’, as its early proponent Abba Lerner (1944) dubbed it, and it became one of the essential tenets of paleo-Keynesian thought. Make the budget stimulative when the economy shows slack, said those Keynesians favouring automatic over-discretionary stabilisation. Make the budget stimulative when the economy shows signs of incipient slack in order to avert that slack, said those advocating discretionary stabilisation. On either view monetary policy was to play the role of keeping real interest rates low in order to hasten the day of full investment, to use Alvin Hansen’s (1960) term for the golden rule state.

Keywords: Monetary Policy; Fiscal Policy; Marginal Utility; Money Supply; Real Interest Rate (search for similar items in EconPapers)
Date: 1988
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-349-19459-9_4

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349194599

DOI: 10.1007/978-1-349-19459-9_4

Access Statistics for this chapter

More chapters in International Economic Association Series from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2025-03-23
Handle: RePEc:pal:intecp:978-1-349-19459-9_4