Fiscal Policy and Unemployment
نویسندگان
چکیده
This paper explores the interaction between fiscal policy and unemployment. It develops a novel dynamic 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. Marco Battaglini Department of Economics Princeton University Princeton NJ 08544 [email protected] Stephen Coate Department of Economics Cornell University Ithaca NY 14853 [email protected] ∗For useful comments and discussions we thank Alan Auerbach, Marco Bassetto, Roland Benabou, Gregory Besharov, Tim Besley, Karel Mertens, Facundo Piguillem, Thomas Sargent, and seminar participants at Binghamton, Chicago, Cornell, Houston, LSE, NBER, the Federal Reserve Bank of Richmond, and Yale.
منابع مشابه
Fiscal Policy , Sovereign Risk , and Unemployment ∗
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