Fiscal Policy Capital Based Macroeconomics with Idle Resources

Journal of Private Enterprise 30.4:81-95

20 Pages Posted: 30 Aug 2014 Last revised: 11 Dec 2015

See all articles by Adrian O. Ravier

Adrian O. Ravier

Universidad Francisco Marroquín

Nicolas Cachanosky

Metropolitan State University of Denver; American Institute for Economic Research; UCEMA Friedman-Hayek Center for the Study of a Free Society

Date Written: March 2, 2015

Abstract

While Garrison’s model has been mostly used to analyze, theoretically and empirically, business cycles, other potential venues have not been explored. The effects of fiscal policy is one of these applications. In this paper we show how Garrison’s model can be used to analyze the effects of fiscal policy in the presence of idle resources. This yields two important results. Particularly, our application of Garrison’s model shows that even if starting with idle resources fiscal policy manages to reach potential output, the result is imbalances in how resources are allocated in the structure of production of the economy.

Keywords: Capital Based Macroeconomics, Keynesian Macroeconomics, Idle resources, Fiscal policy, Crowding out effect

JEL Classification: B53, E12, E62

Suggested Citation

Ravier, Adrian O. and Cachanosky, Nicolas, Fiscal Policy Capital Based Macroeconomics with Idle Resources (March 2, 2015). Journal of Private Enterprise 30.4:81-95, Available at SSRN: https://ssrn.com/abstract=2487615 or http://dx.doi.org/10.2139/ssrn.2487615

Adrian O. Ravier (Contact Author)

Universidad Francisco Marroquín ( email )

Escuela de Negocios
Calle Manuel F. Ayau (6 Calle final), zona 10
Guatemala, 01010
Guatemala

HOME PAGE: http://www.adrianravier.com

Nicolas Cachanosky

Metropolitan State University of Denver ( email )

Student Success Building
890 Auraria Pkwy #310
Denver, CO 80217
United States

HOME PAGE: http://www.ncachanosky.edu

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

UCEMA Friedman-Hayek Center for the Study of a Free Society ( email )

Buenos Aires
Argentina

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