Inflationary finance of budget deficits as an automatic stabilizer

Inflationary finance of budget deficits as an automatic stabilizer

A rational expectations model is presented to generalize McCallum and Whitaker's (1979) model. The model demonstrates the effectiveness and stability of the full-employment budget deficit and of inflationary finance used to finance this deficit as automatic stabilizers in the determination of c...

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Veröffentlicht in:Journal of monetary economics 1986-09, Vol.18 (2), p.197-204
1. Verfasser: Nuri Erbas, S.
Format: Artikel
Sprache:eng
Schlagworte:
Budget deficits
Budgets
Deficit financing
Inflation
Mathematical models
Monetary policy
Monetary theory
Rational expectations
Stabilization
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Zusammenfassung:A rational expectations model is presented to generalize McCallum and Whitaker's (1979) model. The model demonstrates the effectiveness and stability of the full-employment budget deficit and of inflationary finance used to finance this deficit as automatic stabilizers in the determination of current income under rational expectations. Within the same model the problem of optimal dynamic stochastic monetary policy is also briefly explored.
ISSN:0304-3932
1873-1295
DOI:10.1016/0304-3932(86)90076-0