Frankel, Jeffrey, (2016), “Rediscovering Fiscal Policy at the G7”, Project Syndicate, 24 May
As G7 leaders convene in Ise-Shima, Japan, the global economy’s fragility is a top concern. But instead of focusing on currency wars, the leaders of the major developed economies should be discussing fiscal policy, which under current conditions would be a more powerful tool than monetary policy for boosting economic activity. After all, today, unlike in normal times, the effects of fiscal policy would not be limited by too-high interest rates, inadequate private demand, strict capacity constraints, or excessive inflation. Economists dismiss fiscal policy largely because it is “politically constrained.” But that is not a good reason to give up on it. On the contrary, if the political process is producing problematic fiscal policies, as it is today, that is all the more reason for economists to voice their concerns.
Relevant posts
- D’Acunto, Francesco, Hoang, Daniel, Weber, Michael, (2016), “Fighting deflation with unconventional fiscal policy”, VoxEu, 26 April
- Guerguil, Martine, Mandon, Pierre, Tapsoba, Rene, (2016), ” Flexible Fiscal Rules and Countercyclical Fiscal Policy“, IMF Working Paper No. 16/8, 22 January