STABILIZATION AND GOVERNMENT DEFICITS
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impact of this measure. Also, given credit rationing and myopia by individuals,
discretionary fiscal action’s effectiveness is an open-ended issue.
Fiscal policy, which had been used as a short-run tool in the pursuit of sta-
bilizing the business cycle in a liberalized economic environment, is increas-
ingly being asked to deliver over time in the longer run on fiscal discipline.
Fiscal discipline means that the government faces an intertemporal budget
constraint and any fiscal action taken by the government does not violate
this constraint. This does not require the doing away of deficits ...
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