Budgetary Management

key terms

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deficit bias

fiscal policy

economic fluctuations

interest rate

welfare

Governments with strong budgetary positions are those whose budgets are structured such that under normal circumstances, the government’s current disbursements are equal to its current receipts. Thus under normal circumstances the budget balance will be zero.

The structure of many governments’ budgets is such that their promised disbursements exceed the structure of their receipts. In this case the government, even under normal circumstances, will run a budget deficit and accumulate debt. This deficit bias became apparent in Europe starting in the mid-1970s.

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