Year: 2023
Type: article
Abstract: Constructing a post-Keynesian macro-model, we investigate the impact of fiscal expansion on aggregate demand and economic growth, explore public debt sustainability, and analyze whether fiscal policy plays any role in stabilizing the economy. We explore how the interaction between capital accumulation and government debt opens the possibility of multiple equilibria and instability in the economy. We investigate the impact of various parameters on short-run aggregate demand and long-run equilibrium growth rate, and public debt-capital ratio. We explore the relationship between a progressive tax system and a wage-led demand regime. In some cases, a sufficiently high government expenditure to GDP ratio is essential for achieving stability in the system. A sufficiently high government expenditure to GDP ratio ensures economic stability in other circumstances. The possibility of the limit cycle is also explored. Higher autonomous investment demand is desirable as it enhances the stable region of the economy.
Author: Pintu Parui
Institution: XIM University
Language: English
Topic: Economic Theory and Policy
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3085266313