Chapter 10
Can Stimulus without Debt Be Used by Other Countries?
Thus far I have focused exclusively on the United States. What about other economically advanced countries?
An Economically Advanced Country with Its Own Central Bank Stimulus without debt for any economically advanced country with its own central bank is the same as for the United States. In a recession, the central bank makes a transfer to the national government’s treasury, and the national government’s legislature enacts fiscal stimulus roughly equal to the transfer from the central bank. The largest portion of the fiscal stimulus should be tax rebates to households, but the legislature should also include other kinds of fiscal stimulus in the package. The central bank therefore sets the amount of fiscal stimulus that can be implemented without increasing government debt. The national legislature sets the composition of the fiscal stimulus package and the national executive implements through the 173
