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Friday, May 15, 2020 | History

2 edition of Fiscal policy and financial depth found in the catalog.

Fiscal policy and financial depth

by Ricardo J. Caballero

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  • 17 Currently reading

Published by Massachusetts Institute of Technology, Dept. of Economics in Cambridge, MA .
Written in English


About the Edition

Most economists and observers place the lack of fiscal discipline at the core of the recent Argentine crisis. This begs the question of how countries like Belgium or Italy (pre-Maastricht) could run large fiscal deficits and accumulate debts far beyond those of Argentina, without experiencing crises nearly as dramatic as that of Argentina. Why is it that Argentina cannot act like Belgium or Italy and pursue expansionary fiscal policy during downturns? We argue that advanced and emerging economies differ in their financial depth, and show that lack of financial depth constrains fiscal policy in a way that can overturn standard Keynesian fiscal policy prescriptions. We also provide empirical support for this viewpoint. Crowding out is systematically larger in emerging markets than in developed economies. More importantly, this difference is extreme during crises, when the crowding out coefficient exceeds one in emerging market economies. Keywords: sudden stops, financial depth, fiscal deficits, liquidity crises, populism, crowding out. JEL Classifications: E44, E62, F34, F41.

Edition Notes

StatementRicardo J. Caballero [and] Arvind Krishnamurthy
SeriesWorking paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 04-22, Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 04-22.
ContributionsMassachusetts Institute of Technology. Dept. of Economics, Krishnamurthy, Arvind
The Physical Object
Pagination20 p. :
Number of Pages20
ID Numbers
Open LibraryOL24640600M
OCLC/WorldCa57616811

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Fiscal policy and financial depth by Ricardo J. Caballero Download PDF EPUB FB2

Fiscal policy and financial depth. Cambridge, Mass.: National Bureau of Economic Research, © (OCoLC) Material Type: Internet resource: Document Type: Book, Internet Resource: All. Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.

It is the sister strategy to monetary policy through Author: Leslie Kramer. Fiscal Policy and Financial Depth Ricardo J. Caballero, Arvind Krishnamurthy. NBER Fiscal policy and financial depth book Paper No. Issued in May NBER Program(s):Corporate Finance, Economic Fluctuations and Growth.

Get this from a library. Fiscal policy and financial depth. [Ricardo J Caballero; Arvind Krishnamurthy; National Bureau of Economic Research.] -- "Most economists and observers place the lack of fiscal.

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Fiscal policy Government spending and taxing for the specific purpose of stabilizing the economy. Fiscal Policy Government policies related to taxes, spending, and interest rates.

Fiscal policy is intended. Caballero and Krishnamurthy () show how lack of financial depth constrains fiscal policy, since the financing of public debt absorbs all financing resources.

Even though government spending is. Fiscal policy could also be employed to actively restrain financial booms and stabilise output around a sustainable level, rather than simply containing a boom's fallout as it turns to bust.

We show that lack of financial depth constrains fiscal policy in a way that can overturn standard Keynesian fiscal policy prescriptions. By financial depth we mean the supply of funds available to the. The authors hope that economists, public finance professionals, and policy makers working in resource-rich countries—including decision makers in ministries of finance, international organizations, and Cited by: 1.

Why is it that Argentina cannot act like Belgium or Italy and pursue expansionary fiscal policy during downturns. We argue that advanced and emerging economies differ in their financial depth, and show.

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The analysis method used was a combina-Author: Sigit Setiawan.The effects of fiscal policy actions enacted at the federal level in earlier years continued to boost GDP growth in ; the Tax Cuts and Jobs Act of lowered personal and business income taxes, and .