Cohen-Setton, Jérémie, (2016), “The abandonment of counter-cyclical fiscal policy”, Bruegel, 3o May
What’s at stake: The reluctance to use fiscal policy as a stabilizing tool in the current deflationary environment has been puzzling to many and a number of authors are now putting forward possible explanations.In its 2015 Fiscal Monitor, the IMF writes that to be stabilizing, the fiscal balance needs to increase when output rises and to decrease when it falls. That way, fiscal policy generates additional demand when output is weak and subtracts from demand when the economy is booming.
Relevant Posts
- Frankel, Jeffrey, (2016), “Rediscovering Fiscal Policy at the G7”, Project Syndicate, 24 Μay
- Guerguil, Martine, Mandon, Pierre, Tapsoba, Rene, (2016), “Flexible Fiscal Rules and Countercyclical Fiscal Policy”, IMF Working Paper No. 16/8, 22 January