Bent Hansen’s theory of fiscal policy

Abstract

Bent Hansen’s The Economic Theory of Fiscal Policy contains a macroeconomic model, based on optimising agents, to analyse how fiscal policy can be used to secure full employment and a constant value of money. Focus is on the coordination of economic policy. In addition to giving an account of Hansen’s analysis, the choice of model (equilibrium model, inflation model or a Keynesian unemployment model) is discussed. The role of and the modelling of monetary policy is treated, and the possibility of implementing the policy.