The New Palgrave Dictionary of Economics

Living Edition
| Editors: Palgrave Macmillan

Government Budget Constraint

  • Eric M. Leeper
  • James M. Nason
Living reference work entry
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DOI: https://doi.org/10.1057/978-1-349-95121-5_2041-1
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Abstract

The government budget constraint is an accounting identity linking the monetary authority’s choices of money growth or nominal interest rate and the fiscal authority’s choices of spending, taxation, and borrowing at a point in time and across time. The intertemporal links create a rich set of possible outcomes from standard macro policy experiments. Taking the government budget constraint seriously can overturn some widely held beliefs about policy effects.

Keywords

Barro, R. Bond–money ratio Endowment economy Euler equation Fiscal policy Fiscal theory of the price level Fisher relation Government budget constraint Household budget constraint Inflation Markov processes Monetary policy Money supply Ricardian equivalence Ricardo, D. 

JEL Classifications

E6 
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Copyright information

© The Author(s) 2008

Authors and Affiliations

  • Eric M. Leeper
    • 1
  • James M. Nason
    • 2
  1. 1.
  2. 2.