Current and Anticipated Deficits, Interest Rates and Economic Activity

Olivier Blanchard

No 1265, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: There is widespread feeling that current deficits, in Europe and the U.S.,may hurt rather than help the recovery. This paper examines some of the issues involved, through a sequence of three models.The first model focuses on sustainability and characterizes its determinants. It suggests that the issue of sustainability may indeed ber elevant in some countries.The second model focuses on the effects of fiscal policy on real interestrates, and in particular on the relative importance of the level of deficits andthe level of debt in determining interest rates.The third model focuses on the effects of fiscal policy on the speed of the recovery. It shows how a sharply increasing fiscal expansion might be initially contractionary rather than expansionary.

Date: 1984-01
Note: EFG
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Published as Blanchard, Olivier J. "Current and Anticipated Deficits, Interest Rates and Economic Activity." European Economic Review, Vol. 25, (1984), pp. 7-27. North-Holland.
Published as Current and Anticipated Deficits, Interest Rates and Economic Activity , Olivier J. Blanchard. in International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics , de Ménil and Gordon. 1991

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Chapter: Current and Anticipated Deficits, Interest Rates and Economic Activity (1991)
Journal Article: Current and anticipated deficits, interest rates and economic activity (1984)
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