Date of Submission


Date of Award


Institute Name (Publisher)

Indian Statistical Institute

Document Type

Doctoral Thesis

Degree Name

Doctor of Philosophy

Subject Name

Quantitative Economics


Economics and Planning Unit (EPU-Delhi)


Ghate, Chetan (EPU-Delhi; ISI)

Abstract (Summary of the Work)

In the last two decades, several events in the global economy, like the recession in Japan (1990-2010), the dot com crisis in the US, and the recent global economic and Önancial crisis (which started in 2007-08), to name a few, have brought issues related to Öscal policy back into the limelight. If we look back into the history of policy making, Öscal policy was Örst brought onto the centre-stage in the US during the Great Depression years of the 1930s (see Kopcke et al. (2005) and Feldstein (2009)). It was believed that expansionary Öscal policy would serve as an automatic stabilizer and therefore enable the US economy to recover from massive unemployment and negative growth. In fact till the period of the 1960s-1970s, both Öscal and monetary policy received equal importance.During the "Great Moderation" years of 1980s to the 2000s however, Öscal policy appeared to "take a back seat to monetary policy" (see Blanchard et al. (2010)). Given that maintaining stability and low ináation was the priority for advanced economies, policy makers preferred implementing counter-cyclical monetary policy instruments for the purpose of macroeconomic stabilization, instead of counter-cyclical Öscal policy, as the latter a§ects the real economy after considerable lags, and often faces political constraints (see Feldstein (2009) and Blanchard et al. (2010)).Fiscal policy has however not just served as a tool for macroeconomic stabilization during recession years. A vast literature on advanced economies, both empirical and theoretical, has analyzed the e§ects of Öscal policy on long-run growth, welfare, and overall productivity (see Aschauer (1989), Barro (1990), Jones et al. (1993), Kind and Rebelo (1990), Glomm and Ravikumar (1994), Futagami, Morita, and Shibata (1993), Jones (1995), McGrattan (1998), Fischer and Turnovsky (1997, 1998), and Eicher and Turnovsky (2000)).1 The Öndings are mixed, and therefore the issue of the e§ectiveness of Öscal policy ñeven in advanced economies ñ still remain un-resolved. In contrast to this, recent developments in the literature on dynamic stochastic general equilibrium models suggest that Öscal policy could serve as a stabilization tool even in emerging economies (see Male (2010) and Frankel et al. (2013)). This is contrary to previous literature which shows that Öscal policy is less stabilizing in emerging economies compared to advanced economies, because of Önancial frictions, underdeveloped Önancial markets, and poor economic institutions (see AgÈnor et al. (2000), Talvi and Vegh (2005), and Cuadra et al. (2010)).A plethora of research has also analyzed the e§ectiveness of Öscal policy in the context of economic development (see DrÈze and Sen (1989), Gupta et al. (1999, 2001), Chu et al. (2000), Lopes (2002), and Laframboise and Trumbic (2003)). Established by the United Nations, the Millennium Development Goals (MDGs) focuses on eight development issues. One of these deals with the issue nutrition and food security. Several emerging economies have passed the Right to Food as a constitutional amendment (see Knuth and Vidar (2011)). There are both economic and social beneÖts from implementing such a program, although these come at a cost. Governments have to either raise funds through taxation or through defcit fnancing.


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Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.


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