Budget deficits, public debt and the level of public investment

Malcom Sawyer ()

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: This paper begins by briefly identifying the two traditions in macroeconomic analysis with regard to budget deficits, that of ‘fiscal consolidation and Ricardian equivalence’ and the ‘functional finance’ approach. The paper argues for the deficits/debt position to be approached in terms of ‘functional finance’, which sets the budget position to be compatible with the highest achievable and sustainable level of economic activity, to an alternative ‘rule’ for budget deficits to those such as ‘balanced budget over the cycle’. The paper points to the focus on the size of the public debt, and argues that the government’s capital account balance sheet should be viewed in terms of assets and liabilities and not liabilities alone. The paper also argues that there is no merit in the adoption of a ‘golden rule’.

Keywords: Functional finance; fiscal consolidation; budget deficits; public sector balance sheet; public debt (search for similar items in EconPapers)
JEL-codes: E62 H54 H62 (search for similar items in EconPapers)
Date: 2009-11-03
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://wp.demm.unimi.it/files/wp/2009/DEMM-2009_031wp.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to aaa.unimi.it:80 (nodename nor servname provided, or not known) (http://wp.demm.unimi.it/files/wp/2009/DEMM-2009_031wp.pdf [302 Found]--> http://aaa.unimi.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:mil:wpdepa:2009-31

Access Statistics for this paper

More papers in Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano Via Conservatorio 7, I-20122 Milan - Italy. Contact information at EDIRC.
Bibliographic data for series maintained by DEMM Working Papers ( this e-mail address is bad, please contact ).