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A comprehensive analysis of the macroeconomic and financial forces altering the economic landscape Financial decision-making requires one to anticipate how their decision will not only affect their business, but also the economic environment. Unfortunately, all too often, both private and public sector decision-makers view their decisions as one-off responses and fail to see their decisions within the context of an evolving decision-making framework. In Decision-Making in a Dynamic Economic Setting, John Silvia, Chief Economist of Wells Fargo and one of the top 5 economic forecasters according to Bloomberg News and USA Today, skillfully puts this discipline in perspective. Details realistic, decision-making approaches and applications under a broad set of economic scenarios Analyzes monetary policy and addresses the impact of financial regulations Examines business cycles and how to identify economic trends, how to deal with uncertainty and manage risk, the building blocks of growth, and strategies for innovation Decision-Making in a Dynamic Economic Setting details the real-world application of economic principles and financial strategy in making better business decisions.
An attempt to revitalize the traditions of nonmarket clearing approaches to macroeconomics. Using tools from dynamic analysis, the text introduces a consistent, integrated framework for disequilibrium macroeconomic dynamics and explore its relationship to the competing equilibrium dynamics.
An advanced treatment of modern macroeconomics, presented through a sequence of dynamic equilibrium models, with discussion of the implications for monetary and fiscal policy. This textbook offers an advanced treatment of modern macroeconomics, presented through a sequence of dynamic general equilibrium models based on intertemporal optimization on the part of economic agents. The book treats macroeconomics as applied and policy-oriented general equilibrium analysis, examining a number of models, each of which is suitable for investigating specific issues but may be unsuitable for others. After presenting a brief survey of the evolution of macroeconomics and the key facts about long-run economic growth and aggregate fluctuations, the book introduces the main elements of the intertemporal approach through a series of two-period competitive general equilibrium models—the simplest possible intertemporal models. This sets the stage for the remainder of the book, which presents models of economic growth, aggregate fluctuations, and monetary and fiscal policy. The text focuses on a full analysis of a limited number of key intertemporal models, which are stripped down to essentials so that students can focus on the dynamic properties of the models. Exercises encourage students to try their hands at solving versions of the dynamic models that define modern macroeconomics. Appendixes review the main mathematical techniques needed to analyze optimizing dynamic macroeconomic models. The book is suitable for advanced undergraduate and graduate students who have some knowledge of economic theory and mathematics for economists.
Optimal tax design attempts to resolve a well-known trade-off: namely, that high taxes are bad insofar as they discourage people from working, but good to the degree that, by redistributing wealth, they help insure people against productivity shocks. Until recently, however, economic research on this question either ignored people's uncertainty about their future productivities or imposed strong and unrealistic functional form restrictions on taxes. In response to these problems, the new dynamic public finance was developed to study the design of optimal taxes given only minimal restrictions on the set of possible tax instruments, and on the nature of shocks affecting people in the economy. In this book, Narayana Kocherlakota surveys and discusses this exciting new approach to public finance. An important book for advanced PhD courses in public finance and macroeconomics, The New Dynamic Public Finance provides a formal connection between the problem of dynamic optimal taxation and dynamic principal-agent contracting theory. This connection means that the properties of solutions to principal-agent problems can be used to determine the properties of optimal tax systems. The book shows that such optimal tax systems necessarily involve asset income taxes, which may depend in sophisticated ways on current and past labor incomes. It also addresses the implications of this new approach for qualitative properties of optimal monetary policy, optimal government debt policy, and optimal bequest taxes. In addition, the book describes computational methods for approximate calculation of optimal taxes, and discusses possible paths for future research.
Extremes in income and wealth inequality are leading us closer to a highly insecure and unstable economy. Neoclassical, monetarist, Keynesian, and other economic paradigms have proven inadequate to explain this phenomenon. ​While many books promote redistribution as an issue of fairness, Lawrence C. Marsh’s Optimal Money Flow explicitly sets aside the fairness issue to argue instead that redistribution is imperative for economic efficiency, stability, and maximum economic growth. Marsh introduces his unique money flow paradigm as the replacement for other economic paradigms that have failed at addressing the situation we face today. Marsh’s money flow paradigm views the flow of money to the top of the wealth pyramid as inherent, inevitable, and inexorable to the free enterprise system. This new paradigm requires that government assume its rightful responsibility to direct sufficient money flow from the top to the bottom (like a heart pumping blood throughout the body) in order to maximize employment, economic growth, and efficient resource allocation. In a healthy economy, the money then flows naturally back up to the top in a circulatory flow. Optimal Money Flow provides an abundance of stimulating, original ideas for readers who appreciate books at the intersection of economics and politics. One such idea is Marsh’s "My America" personal accounts. This new policy tool would serve as an alternative to the Fed buying US Treasury securities in New York financial markets, which just lowers interest rates and boosts stock and bond prices. Instead, a "My America" Federal Reserve bank account would be created for every American, into which money could be injected directly to provide consumers with cash to stimulate demand when the economy slows. Conservatives will appreciate two aspects of this approach: The people, not the government, decide how to spend the money, and it does not increase taxes or add to the national debt, while it simultaneously avoids excessive inflation through prudent monetary management. It also uses less money and has a more direct and immediate impact on consumer demand than the purchase of US Treasury securities. Lawrence Marsh sees government as the heart of the free enterprise system—where it does and should play an active part in maintaining and ensuring efficient and equitable resource allocation in an economy. Previous economic paradigms viewed government as an external, alien force outside the system, but Marsh promotes a very different approach. While he acknowledges there is efficiency in the market for ordinary goods and services, he sees contagion effects and inefficiency in many financial markets. With higher levels of globalization, low levels of unionization, and more rapid technological change, a new type of business cycle has emerged—one in which rising middle-class debt and stock market bubbles have replaced price and wage inflation as the source of economic instability. Marsh believes government can contribute to the efficiency of the free enterprise system by better aligning marginal costs and marginal benefits, and that in the long run, government can greatly enhance efficiency, productivity, and economic growth. Marsh also takes on the commonly held notion of a static fight over a fixed economic pie with the assertion that this view must be replaced with one of a dynamic process that maximizes the growth rate of the economic pie for everyone—by keeping the money flowing to all parts of the economy. Optimal Money Flow’s important message and unique proposals deliver a fresh view of the interconnectedness of the globe and an updated understanding of the underlying economic forces that shape our lives today—including international trade and how one country's decisions now impact the rest of the world. Readers will rethink their basic assumptions about the nature of economics and the role of government.
This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.
The recent recession has brought fiscal policy back to the forefront, with economists and policy makers struggling to reach a consensus on highly political issues like tax rates and government spending. At the heart of the debate are fiscal multipliers, whose size and sensitivity determine the power of such policies to influence economic growth. Fiscal Policy after the Financial Crisis focuses on the effects of fiscal stimuli and increased government spending, with contributions that consider the measurement of the multiplier effect and its size. In the face of uncertainty over the sustainability of recent economic policies, further contributions to this volume discuss the merits of alternate means of debt reduction through decreased government spending or increased taxes. A final section examines how the short-term political forces driving fiscal policy might be balanced with aspects of the long-term planning governing monetary policy. A direct intervention in timely debates, Fiscal Policy after the Financial Crisis offers invaluable insights about various responses to the recent financial crisis.
What are fiscal policy rules? What are the principal benefits and drawbacks associated with various fiscal rules, particularly compared with alternative approaches to fiscal adjustment? Can fiscal rules contribute to long-run sustainability and welfare without sacrificing short-run stabilization? If so, what characteristics of fiscal rules make this contribution most effective? And in what circumstances and contexts, if any should the IMF encourage its member countries to adopt fiscal rules? This paper seeks to identify sensible fiscal policy rules that can succeed, if chosen by a member country, as an alternative to descretionary fiscal rules.