338
MACROECONOMICS
correction in 1990–1991 after which there was a decline till 1996–1997 in the
primary deficit/GDP ratio except for the solitary year 1993–1994. After 1996–
1997, however, till 2002–2003, the fiscal situation worsened again and the
increased primary deficits during this period required substantial fiscal cor-
rection policy initiatives afterward.
12.5
Fiscal Rules for Adjustment
Before expounding on what are the constituents of a fiscal correction it should be
mentioned that apart from debt the deficit is financed by money creation. Thus,
(
M
t
-
M
t
-
1
)
+
(
B
t
-
B
t
-
1
)
=
rB
t
-
1
+
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