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Trigger Points and Budget Cuts: Explaining the Effects of Fiscal Austerity / Giuseppe Bertola, Allan Drazen.
- Format:
- Book
- Author/Creator:
- Bertola, Giuseppe.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w3844.
- NBER working paper series no. w3844
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Trigger Points and Budget Cuts
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1991.
- Summary:
- We propose and solve an optimizing model which explains counterintuitive effects of fiscal policy in terms of expectations. If government spending follows an upward-trending stochastic process which the public believes may fall sharply when it reaches specific "target points," then optimizing consumption behavior and simple budget constraint arithmetic imply a nonlinear relationship between private consumption and government spending. This theoretical relation is consistent with the experience of several countries.
- Notes:
- Print version record
- September 1991.
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