The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Government Budget Constraint

  • Eric M. Leeper
  • James M. Nason
Reference work entry


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.


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. 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Eric M. Leeper
  • James M. Nason

There are no affiliations available