Public Debt and Rules of Monetary Growth: An Exercise in Monetarist Arithmetic

  • Luigi Spaventa
Part of the International Economic Association Series book series (IEA)


The problem of the financing of government deficit and of public debt is an old one and covers different issues. In earlier literature the major question regarded the alternative ways of financing a once-and-for-all extraordinary expenditure incurred by the State, because, say, of a war: the obvious reference here is to Ricardo (ed. Sraffa, 1962) and to de Viti de Marco (1953), where a wealth of arguments which were later rediscovered and redebated can be found. A great deal of attention was then devoted to the question of the burden of the debt and a number of open issues here were settled by Modigliani (1961). In Keynesian times and in the frame of the IS-LM paradigm there was a shift of attention: deficit spending was considered a possible tool for economic stabilisation and the debate concerned the relative merits of monetary financing and debt financing.1


Monetary Policy Fiscal Policy Real Interest Rate Public Debt Money Demand 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Barro, R. (1974) ‘Are Government Bonds Net Wealth?’ Journal of Political Economy, vol. 82.Google Scholar
  2. Blinder, A. S. and Solow, R. M. (1973) ‘Does Fiscal Policy Matter?’ Journal of Public Economics, vol. 2.Google Scholar
  3. Blinder, A. S. and Solow, R. M. (1974) ‘Analytical Foundations of Fiscal Policy’, in The Economics of Finance, The Brookings Institution.Google Scholar
  4. de Viti de Marco, A. (1953) Principi di Economia Finanziaria (3rd ed.) (Turin: Bozinghiezi) chapter XXIX.Google Scholar
  5. Modigliani, F. (1961) ‘Long-run Implications of Alternative Fiscal Policies and the Burden of National Debt,’ Economic Journal, vol. 71, no. 284, pp. 730–55.CrossRefGoogle Scholar
  6. Ricardo, D. (ed. Sraffa 1962) On the Principles of Political Economy and Taxation, vol. 1 of the Works and Correspondence of David Ricardo, ed. Piero Sraffa (3rd ed. 1821) (Cambridge: Cambridge University Press) pp. 243ff.Google Scholar
  7. Sargent, T. J. and Wallace, N. (1981) ‘Some Unpleasant Monetarist Arithmetic’, Federal Reserve Bank of Minneapolis Quarterly Review, Fall (frequently referred to in the text as SW).Google Scholar
  8. Tobin, J. (1980) Asset Accumulation and Economic Activity (Oxford: Blackwell) chapter 11.Google Scholar
  9. Tobin, J. and Buiter, W. (1980) ‘Fiscal and Monetary Policies, Capital Formation and Economic Activity’, in von Furstenberg, G. M. (ed.) The Government and Capital Formation (Cambridge, Mass.: Ballinger).Google Scholar

Copyright information

© International Economic Association 1987

Authors and Affiliations

  • Luigi Spaventa
    • 1
  1. 1.University of RomeItaly

Personalised recommendations