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The Ricardian Approach to Budget Deficits

The Ricardian Approach to Budget Deficits Abstract In recent years there has been a lot of discussion about U.S. budget deficits. Many economists and other observers have viewed these deficits as harmful to the U.S. and world economies. The supposed harmful effects include high real interest rates, low saving, low rates of economic growth, large current-account deficits in the United States and other countries with large budget deficits, and either a high or low dollar (depending apparently on the time period). This crisis scenario has been hard to maintain along with the robust performance of the U.S. economy since late 1982. Persistent budget deficits have increased economists' interest in theories and evidence about fiscal policy. At the same time, the conflict between standard predictions and actual outcomes in the U.S. economy has, I think, increased economists' willingness to consider approaches that depart from the standard paradigm. In this paper, I will focus on the alternative theory that is associated with the name of David Ricardo. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Perspectives American Economic Association

The Ricardian Approach to Budget Deficits

Barro, Robert J
Journal of Economic Perspectives , Volume 3 (2) – May 1, 1989
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Publisher
American Economic Association
Copyright
Copyright © 1989 by the American Economic Association
Subject
Symposium
ISSN
0895-3309
DOI
10.1257/jep.3.2.37
Publisher site
See Article on Publisher Site

Abstract

Abstract In recent years there has been a lot of discussion about U.S. budget deficits. Many economists and other observers have viewed these deficits as harmful to the U.S. and world economies. The supposed harmful effects include high real interest rates, low saving, low rates of economic growth, large current-account deficits in the United States and other countries with large budget deficits, and either a high or low dollar (depending apparently on the time period). This crisis scenario has been hard to maintain along with the robust performance of the U.S. economy since late 1982. Persistent budget deficits have increased economists' interest in theories and evidence about fiscal policy. At the same time, the conflict between standard predictions and actual outcomes in the U.S. economy has, I think, increased economists' willingness to consider approaches that depart from the standard paradigm. In this paper, I will focus on the alternative theory that is associated with the name of David Ricardo.

Journal

Journal of Economic Perspectives – American Economic Association

Published: May 1, 1989

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