‘Crowding out’ refers to all the things which can go wrong when debt-financed fiscal policy is used to affect output. While the initial focus was on the slope of the LM curve, ‘crowding out’ now refers to a multiplicity of channels through which expansionary fiscal policy may in the end have little, no or even negative effects on output.
Accumulation of capital Aggregate demand Budget deficits Crowding out Fiscal consolidation Fiscal expansion Fiscal policy Flexible exchange rates Full employment Inflation Interest rates Intertemporal taxation Investment tax credit IS–LM model Labour supply Lump sum taxes Multiplier analysis Mundell–Fleming model Natural rate of unemployment Private spending Public debt Public expenditure Ricardian equivalence theorem Risk premium Taxation of income
This is a preview of subscription content, log in to check access.
Barro, R. 1974. Are government bonds net wealth? Journal of Political Economy 82: 1095–1117.CrossRefGoogle Scholar
Baxter, M., and R. King. 1993. Fiscal policy in general equilibrium. American Economic Review 83: 315–334.Google Scholar
Blanchard, O. 1985. Debt, deficits, and finite horizons. Journal of Political Economy 93: 223–247.CrossRefGoogle Scholar
Giavazzi, F., and M. Pagano. 1990. Can severe fiscal contractions be expansionary? NBER Macroeconomics Annual 5: 75–122.CrossRefGoogle Scholar
Tobin, J., and W. Buiter. 1976. Long-run effects of fiscal and monetary policy on aggregate demand. In Monetarism, ed. J. Stein. Amsterdam: North-Holland.Google Scholar