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This paper focuses on two books that Robert Heilbroner wrote with Peter Bernstein on public finance – A Primer on Government Spending (1963) and The Debt and the Deficit (1989). It also discusses how the economic world changed between the early 1960s and the late 1980s, and how these changes affected their books. Primer introduced Keynesian economics, and the possibility that government policy and deficits could be forces for good in the world. Debt focused exclusively on government deficits and public debt. Changing circumstances made this work a more difficult undertaking. During the late 1950s and early 1960s, government budget deficits were small, growth was sluggish, and Keynesianism was the dominant paradigm in macroeconomics. Primer explained Keynesian public finance, why tax cuts would spur spending and growth, and why we should not worry about government debt under these circumstances. By the 1980s, Keynes was vanquished, deficits were ballooning, and Keynesian public finance was under attack. Contrary to the conventional wisdom at the time, Debt advocated government deficits along the lines proposed by Keynes but not along the lines enacted during the Reagan administration. Nonetheless, there were many similarities in these two works. Both made a case for an active government role in creating a good society; and both argued that when done correctly deficit spending created no economic problems and had many benefits.

This essay aims to analyze the process of structural adjustment in developing countries. Its focus is on macroeconomic stabilization in the short‐term, but the analysis is situated in a wider context to consider how it relates to the implications of structural reform in the medium‐term and the prospects for economic growth in the long‐term.

The paper begins by setting out the contours of the orthodox, the Keynesian and the heterodox perspectives on stabilization and adjustment to highlight the differences. Such different perspectives on macroeconomic theory and policy, it suggests, are attributable to differences in objectives, assumptions and beliefs. These are made explicit.

The paper argues that the relationship between stabilization and growth is characterized by inter‐connections rather than trade‐offs and suggests that outcomes depend on modes of adjustment. It also provides a macroeconomic analysis of government deficits and public finances, which are critical in the process of adjustment. This highlights the macroeconomic significance of government deficits and points to the fallacies of deficit fetishism based on accounting frameworks. The intersection of economics and politics in the design and implementation of macroeconomic policies is also explored.

Going beyond a critique of orthodox stabilization programmes, it shows that there are alternatives in macro‐management for economies in crisis, for which it is necessary to shift the focus from the financial to the real economy, from the short‐term to the long‐term, and from equilibrium to development.

The paper develops a heterodox perspective on the macroeconomics of structural adjustment and public finances. And, it sets out an alternative framework which straddles time horizons, to understand the restructuring of economies over time.

The effects of government expenditure on the shadow economy have been investigated. However, the effect from a moderating factor that affects this relationship has been largely ignored in the existing literature. This paper investigates how fiscal deficit moderates the effects of government expenditure on the shadow economy for 32 Asian countries for the past two decades since 2000.

The authors use various techniques, which allow cross-sectional dependence and slope homogeneity in panel data analysis, to examine this relationship in both the long run and short run. The analysis also considers the marginal effects of government expenditure on the shadow economy at different degrees of fiscal deficits.

Empirical findings from this paper indicate that an increase in government expenditure and fiscal deficit will increase the shadow economy size. Interestingly, the effects of government expenditure on the shadow economy will intensify with a greater degree of the budget deficit. The authors also find that enhancing economic growth to improve income per capita and extending international trade appears to reduce the shadow economy in the Asian countries.

The authors consider that policies targeting reducing shadow economy should follow conventional economic policies on economic growth, unemployment and inflation.

To the best of the authors’ knowledge, this is the first empirical study conducted to examine the moderating role of fiscal deficit in the government expenditure–shadow economy nexus in Asian countries.

This paper investigates the relationship between government borrowing and long‐term interest rates utilizing a loanable funds framework to describe the interest rate determination process. Three measures of government borrowing are examined. The results indicate that there is not a significant relationship between government borrowing and long‐term interest rates.

The US federal deficit has, over the years, remained a subject of widespread concern and controversy. Diverse views continue to be expressed on such questions as whether the deficit matters, whether it is the inflation‐adjusted deficit that matters, whether bond‐financed deficits are inflationary, and whether it is only deficits that are financed by money creation which are inflationary. Against this background, few would disagree with Boskin (1982) that “progress in improving our understanding of the role of the budget deficit in economic behavior and performance… is an urgent research priority”.

This paper reexamines the relationship between budget deficits and exchange rates by applying Hakkio’s (1996) model to seven Asian countries and eight Euro‐currency countries over the years from 1951 to 2001. Applying the Time‐Series Cross‐Section Regression with the Seemingly Unrelated Regression approach to data from 15 countries, the results indicate that because of the indirect effect of the expected inflation rate, the risk premium, and the expected return rate, currency values are inversely related to budget deficits. However, the empirical results also present evidence supporting the Ricardian Equivalence Proposition that there is no direct effect of budget deficits on exchange rates.

This article examines the effect of party composition of government on the centralization of budgeting institutions in Hungary, Poland, the Czech Republic and Bulgaria in 1989-1999, and assesses the impact of the centralization of budgeting institutions on the capacity of these countries to meet the fiscal deficit requirement for the European Economic and Monetary Union (EMU) membership. The article finds that centralization of budgeting institutions through delegation to a strong finance minister and/or prime minister is likely to occur in one-party governments or coalition governments composed of parties which expect to fight repeated elections together, with effective punishment mechanisms. The article finds that countries with centralized budgeting institutions are likely to be more capable of meeting the EMU deficit requirement than countries with decentralized institutions.

This study aims to investigate the public deficit issue by contrasting conventional and Islamic views encompassing the paradigm, technical base, orientation and consequence detailed in nine discussions, which are rarely investigated in the research. There is a predisposition that contemporary Muslim scholars discuss the public deficit as well as the private sector perspective, which is used in the conventional conception, without riba as a primary feature.

The paper develops a comparative approach that derives two perspectives from the available literature using the qualitative method under the critical thinking method. It was drawn up in detail on how the paradigm and its related budgeting process contribute to public deficits, mainly in government institutions.

The paper reveals a prominent difference in public deficit in the Islamic view from a conventional perspective. From 9 points of comparison, the analysis covers 18 discussion that differentiates between private and public area criticism seems to overlap. The foundation giving a unique perspective in Islam toward public deficit is the concept of ownership that differs from capitalism, mainly the function of public spending is to distribute the wealth among people not for economic growth. The Islamic Government spent for public purposes based on cash-basis budgeting. The budgeting system in Islamic public spending is founded on treasure availability.

The paper uses a qualitative method that cannot empirically snapshot the actual or factual condition, in which subjectivity plays a plausible role. Furthermore, there is no actual sample (best practices) of the concept to be examined.

The research encompasses overlap between Islamic and conventional perspectives, including public and private issues regarding public deficits. The main beneficiary of the paper is a policymaker, including academicians or practitioners who are appropriate to use the concept in their circumstances.

The study is a pioneering study in public deficit comprehensively comparing conventional and Islamic perspectives and drawing up conceptual and technical aspects.

An exciting opportunity that many advanced industrial democracies faced in the late 1990s was the movement from budgetary deficit to surplus. This came after years of persistent deficits. Traditional decisionmaking theories such as budgetary incrementalism failed to explain this longrun relationship, since it has been inherently a short-run theory. This paper uses rational expectations theory to demonstrate its relationship to budgetary decision-making reforms and the deficit (surplus) for Canada, the UK and the United States. The results demonstrated that there was an intertemporal budget constraint in operation in the three countries, and decision-makers at the macro level used rational expectations in the formulation of their annual budget. In the theory, budget actors strived to balance their budget, but did so over the longrun as opposed to the short-run incrementalist interpretation.