Fiscal Policies in an Intertemporal Disequilibrium Macroeconomic Model.

A two-period macroeconomic model where consumption and investment decisions are given microeconomic foundations is presented. The model is used.to analyze the effects of both current and anticipated fiscal expansion; careful attention is paid to the implications of the government's intertemporal budget constraint. It is shown that anticipated fiscal expansion may, in certain circumstances, be expansionary. Also, current fiscal expansion, if financed by bonds which are retired through future money creation, may be contractionary. Copyright 1993 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research