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Tag Archives: household fallacy

Roger Farmer — The Household Fallacy

My new working paper, joint with Pawel Zabczyk, is out now as an NBER working paper, a CEPR discussion paper and a NIESR discussion paper. Here is the abstract:We refer to the idea that government must ‘tighten its belt’ as a necessary policy response to higher indebtedness as the household fallacy. We provide a reason to be skeptical of this claim that holds even if the economy always operates at full employment and all markets clear. Our argument rests on the fact that, in an...

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