Fiscal Policy in Dynamic Economies - 9780415603157

The role of fiscal policy in short-run macroeconomic stabilization is, by now, well known in the academic literature and in policy circles. However, this focus on the short-run, especially in a democracy, means that much less attention has been paid to the other consequences of the use of fiscal policy. These include not only the long-run consequences of fiscal policy but also its intergenerational and welfare effects as well.

The book fills this gap and examines fiscal policy in dynamic economies, that is, economies in which not only the short run matters but in which intergenerational and long-run considerations figure prominently as well. In particular, the book considers the positive and normative effects of fiscal policy in closed economies as well as open economies in both the short run and long run. In addition, it looks at the effects of fiscal policy in which the interaction between fiscal policy and monetary policy becomes important. Such interactions arise when fiscal policy is financed by money seigniorage or when monetary policy has an effect on fiscal policy.