Archive
Countercyclical Fiscal Policy and the Paradox of Debt: The Principles of the Stock Flow Consistent Model
Countercyclical Fiscal Policy and the Paradox of Debt: The Principles of the Stock Flow Consistent Model
YUKI TADA
We study the role of the countercyclical (CC) fiscal policy compared with the Maastricht fiscal (MA) regime and the constant growth of government expenditure (CG). We show 1) the CC fiscal regime provides the most stable growth. 2) The paradox of debt holds in the private sector and government sector. 3) CC fiscal policy would best fix the liability-to-asset ratio and counter the balance sheet recession. 4) Zero nominal interest rate policy would not achieve in higher capital accumulation while enabling firms to retain higher cash flow. 5) A decline in the deposit rate might cause lower consumption and negative wealth effects.
Volume :- No.17 (2023)
Issue No :- 1 (2023)
Pages :- 5-45