EconPapers    
Economics at your fingertips  
 

Fiscal policy as a stabilization instrument

Giorgio Liotti ()

Discussion Papers from CRISEI, University of Naples "Parthenope", Italy

Abstract: This paper investigates the role of the fiscal authority in the case in which a negative shock hits the economic system. We analyze the several kinds of behavior that the fiscal authority can adopt during a crisis and show how the various approaches impact upon the effectiveness of fiscal policy. In general, there are two approaches: a) Adopt a neutral behavior or b) Adopt an active behavior in order to stabilize output volatility caused by a slump. Using a constrained minimization process it emerges that the mere use of a monetary policy is ineffective to counteract the crisis, with the risk of keeping the system in a situation in which aggregate demand falls below the potential output. In this context, an expansionary fiscal policy may be crucial to restore the output equilibrium.

Keywords: crisis; fiscal authority; monetary authority; budget deficit; sustainability (search for similar items in EconPapers)
JEL-codes: E61 E63 (search for similar items in EconPapers)
Date: 2014-06-01
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.crisei.uniparthenope.it/wp/materiale/crisei_dp_01_2014.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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:crj:dpaper:1_2014

Access Statistics for this paper

More papers in Discussion Papers from CRISEI, University of Naples "Parthenope", Italy Contact information at EDIRC.
Bibliographic data for series maintained by Margherita Gallo ().

 
Page updated 2020-11-27
Handle: RePEc:crj:dpaper:1_2014