Do Loanable Funds Modify the Crowd Out Effects of the One-Variable Deficit (T − G)?

John Heim

Chapter Chapter 10 in Why Fiscal Stimulus Programs Fail, Volume 2, 2021, pp 179-210 from Springer

Abstract: Abstract This chapter test the crowd out effects of deficits, measured as one variable (T − G), on consumption and investment. Effects in 18 different time periods are tested. Differences in results using one and two variable formulations of the loanable funds effect are compared. The findings almost invariably indicate that increases in loanable funds can be shown to historically have offset crowd out effects, and reaffirms that for consumption, two loanable funds variables must be included in models to fully pick up the loanable funds effects. Table 10.5 shows clearly how much more important endogenous growth in loanable funds has been in reducing crowd out than exogenous growth.

Date: 2021
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DOI: 10.1007/978-3-030-64727-8_10

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