The present paper offers a fundamental critique of the macroeconomic effects of fiscal policy
after it surveys the theoretical and empirical literature on the macroeconomic effects of fiscal
policy. It emphasizes the importance of the fiscal policy after reviewing the revolution of almost
all economic schools . This paper links the developmental role of the fiscal policy with the
objectives and measures of the economic transformation. Thus, the importance of this study can
be seen from several perspectives: First, it reviews the theoretical harvest of fiscal policy and
provides a comparison between the main revolutionary Economic thoughts; the classical
school, Keynesian school, and monetarist school. Then it turns to conclude the fiscal policy
from the new consensus mainstream economic schools. Third , the study present the
macroeconomic effects of fiscal policy in developed vs developing countries according to
empirical pieces of evidence provided by empirical studies applying VAR approach, finally the
paper concludes the macroeconomic effects of fiscal policy according to theoretical consensus
and Empirical evidence in a nutshell. Thus, the study is important for the policymakers as well
as scholars as it gives its recommendations upon the last analysis in the form of “policy
implications”. |
