Abstract:Implicit in fiscal policy debates is that there is a trade‐off between output and debt outcomes; stimulus is at the expense of debt, and austerity at the expense of output. This paper theoretically and empirically investigates this trade‐off through analysing the relationship between traditional output multipliers and ‘debt multipliers’ (the impact of policy on government debt). Theoretically the elasticity between the two is the marginal tax rate from movements of output in response to policy. This leads to t… Show more
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