The debate on the crisis: recent reappraisals of the concept of functional finance

Giuseppe Mastromatteo

Risultato della ricerca: Working paper

Abstract

This paper seeks to map out the possible paths of effective management of public action – including the possibility of deficit-financed action – designed, firstly, to short-term problems, with an immediate impact against economic depression, and secondly, to the medium-long-term perspective, aiming to assure that the extent and role of policies enacted is sustainable over time. This analytical approach underscores the theoretical validity of an active role of fiscal policy in helping to overcome severe recessions, provided that this policy is underpinned by appropriate institutional rules and a judicious application of the method of functional finance. This approach implies that the economic evaluation of deficit financed projects and careful selection of meritorious projects should be oriented towards goals of collective interest. Also, such projects should always pursue the goal of increasing the productivity of the economic system, with a view to achieving sustainable growth and, over time, allowing the debt to be suitably refinanced, managed and reduced by means of budget surpluses obtained during economic upswings.
Lingua originaleEnglish
Numero di pagine31
Stato di pubblicazionePubblicato - 2011

Keywords

  • crises, policies, functional finance, growth and sustainability of the

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