The Dangers of Targeting the Budget Deficit (1995)

James Perkins

Chapter 9 in The Reform of Macroeconomic Policy, 2000, pp 143-155 from Palgrave Macmillan

Abstract: Abstract The intermediate target most widely used in discussions of macroeconomic policy in many countries in recent years been the budget deficit, or in Britain the Public Sector Borrowing Requirement (the PSBR): what its level should be, and whether it should be increased, and if so by how much. This chapter considers a number of the dangers involved in this approach, looking first at some widely known objections (which are, nevertheless, almost completely ignored in most of the public discussion). It then discusses in more detail a particular set of problems that arises out of the fact that different ways of bringing about a given level, or a given change, in the budget deficit (on some definition) can have varying effects on any of the various possible fundamental objectives of macroeconomic policy.

Keywords: Monetary Policy; Real Interest Rate; Public Debt; Real Output; Budget Balance (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-28873-7_9

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DOI: 10.1057/9780230288737_9

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