Sustaining Domestic Budget Deficits in Open Economies FROM THE PUBLISHER
Farrokh Langdana makes an important contribution to the understanding of this complex area by presenting a consistent economic framework for analyzing the effects and implications of large bond-financed deficits. He uses an open-economy rational expectations model to
explore to what extent governments can simply CCCC"roll-overCCCC" debt by issuing more bonds without any help from the monetary authority and examines the impact of foreign capital on the sustainability of domestic budget deficits, the behavior of exchange rates, and the possible effects
of fiscal and monetary policies. This model is placed in the context of the major economic orthodoxies and their competing stances, and also of the American monetary history from Truman to Reagan and the crash of 1987.
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