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government budget constraint

Eric M. Leeper and James M. Nason
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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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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How to cite this article

Leeper, Eric M. and James M. Nason. "government budget constraint." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 22 October 2014 <http://www.dictionaryofeconomics.com/article?id=pde2008_G000161> doi:10.1057/9780230226203.0662

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