Abstract
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.
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Leeper, E.M., Nason, J.M. (2018). Government Budget Constraint. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2041
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2041
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