Budget Deficits and Macroeconomic Policy

This book argues that making the budget deficit a target of policy can make it harder for governments to work towards all the main macroeconomic objectives - low inflation, high employment and the level of net national wealth (including the current account). It shows how different forms of government outlay and different forms of revenue can have very different effects on all the macroeconomic objectives while having the same effect on the budget balance, and illustrates this by drawing upon the results of simulations from various sources for the OECD countries as a group, and for the United States, Japan, Germany, France, the United Kingdom, Italy, Canada, Australia, Belgium, Denmark, Finland, Ireland, the Netherlands, New Zealand, Norway, Portugal, Spain and Sweden, and considers the implications for policy. The bearing of the setting of monetary policy and exchange rate policy on the outcome is also discussed.