The Two-Way Relationship between the Budget and Economic Variables.

This article aims to investigate the effect of a hypothetical major budget decision on both stabilization and allocation variables over a five-year planning horizon. First, the endogenous nature of many budget outlays is recognized by defining relationships between outlays and general macroeconomic variables. Second, a framework is established for estimating the net allocative effect of the budget. Finally, the paper uses a simple macroeconomic model to trace out the effect of a choice between two alternative budgets on both stabilization and allocation and thus attempts to synthesize the aspects of budget policy.