Fiscal Policy and Unemployment
Marco Battaglini () and
Stephen Coate ()
No 17562, NBER Working Papers from National Bureau of Economic Research, Inc
This paper explores the interaction between fiscal policy and unemployment. It develops a dynamic economic model in which unemployment can arise but can be mitigated by tax cuts and public spending increases. Such policies are fiscally costly, but can be financed by issuing government debt. In the context of this model, the paper analyzes the simultaneous determination of fiscal policy and unemployment in long run equilibrium. Outcomes with both a benevolent government and political decision-making are studied. With political decision-making, the model yields a simple positive theory of fiscal policy and unemployment.
JEL-codes: E6 E62 H3 H63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac, nep-pbe and nep-pol
Note: EFG PE POL
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