Carlo Cottarelli, Philip Gerson, and Abdelhak Senhadji (eds)
- Published in print:
- 2014
- Published Online:
- September 2015
- ISBN:
- 9780262027182
- eISBN:
- 9780262324113
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262027182.001.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
Fiscal policy makers have faced an extraordinarily challenging environment over the last few years. At the outset of the global financial crisis, the International Monetary Fund (IMF) for the first ...
More
Fiscal policy makers have faced an extraordinarily challenging environment over the last few years. At the outset of the global financial crisis, the International Monetary Fund (IMF) for the first time advocated a fiscal expansion across all countries able to afford it, a seeming departure from the long-held consensus among economists that monetary policy rather than fiscal policy was the appropriate response to fluctuations in economic activity. Since then, the IMF has emphasized that the speed of fiscal adjustment should be determined by the specific circumstances in each country. Its recommendation that deficit reduction proceed steadily, but gradually, positions the IMF between the fiscal doves (who argue for postponing fiscal adjustment altogether) and the fiscal hawks (who argue for a front-loaded adjustment). This volume brings together the analysis underpinning the IMF's position on the evolving role of fiscal policy. After establishing its analytical foundation, with chapters on such topics as fiscal risk and debt dynamics, the book analyzes the buildup of fiscal vulnerabilities before the crisis, presents the policy response during the crisis, discusses the fiscal outlook and policy challenges ahead, and offers lessons learned from the crisis and its aftermath. Topics discussed include a historical view of debt accumulation; the timing, size, and composition of fiscal stimulus packages in advanced and emerging economies; the heated debate surrounding the size of fiscal multipliers and the effectiveness of fiscal policy as a countercyclical tool; coordination of fiscal and monetary policies; the sovereign debt crisis in Europe; and institutional reform aimed at fostering fiscal discipline.Less
Fiscal policy makers have faced an extraordinarily challenging environment over the last few years. At the outset of the global financial crisis, the International Monetary Fund (IMF) for the first time advocated a fiscal expansion across all countries able to afford it, a seeming departure from the long-held consensus among economists that monetary policy rather than fiscal policy was the appropriate response to fluctuations in economic activity. Since then, the IMF has emphasized that the speed of fiscal adjustment should be determined by the specific circumstances in each country. Its recommendation that deficit reduction proceed steadily, but gradually, positions the IMF between the fiscal doves (who argue for postponing fiscal adjustment altogether) and the fiscal hawks (who argue for a front-loaded adjustment). This volume brings together the analysis underpinning the IMF's position on the evolving role of fiscal policy. After establishing its analytical foundation, with chapters on such topics as fiscal risk and debt dynamics, the book analyzes the buildup of fiscal vulnerabilities before the crisis, presents the policy response during the crisis, discusses the fiscal outlook and policy challenges ahead, and offers lessons learned from the crisis and its aftermath. Topics discussed include a historical view of debt accumulation; the timing, size, and composition of fiscal stimulus packages in advanced and emerging economies; the heated debate surrounding the size of fiscal multipliers and the effectiveness of fiscal policy as a countercyclical tool; coordination of fiscal and monetary policies; the sovereign debt crisis in Europe; and institutional reform aimed at fostering fiscal discipline.
Carlo Cottarelli, Philip Gerson, and Abdelhak Senhadji
- Published in print:
- 2014
- Published Online:
- September 2015
- ISBN:
- 9780262027182
- eISBN:
- 9780262324113
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262027182.003.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This book analyzes the International Monetary Fund's (IMF) change of position on the role of fiscal policy, with particular emphasis on its call for a global fiscal expansion in the wake of the 2008 ...
More
This book analyzes the International Monetary Fund's (IMF) change of position on the role of fiscal policy, with particular emphasis on its call for a global fiscal expansion in the wake of the 2008 financial crisis—a seeming departure from the organization's long-held position that monetary policy, not fiscal policy, was the appropriate response to an economic slowdown. More specifically, it examines the IMF's views on how fiscal adjustment should be implemented across countries based on the state of their public finances, market pressures, and the state of the economy as well as the impact that fiscal adjustment would have on it. In countries that were not facing market pressures and had adopted credible medium-term fiscal adjustment plans, the IMF has recommended proceeding with deficit reduction at a steady, gradual pace, thus taking an intermediate position between the fiscal doves (who have argued that fiscal adjustment could be postponed altogether to provide continued support to demand) and the fiscal hawks (who have held that a front-loaded adjustment was needed to prevent a fiscal crisis.Less
This book analyzes the International Monetary Fund's (IMF) change of position on the role of fiscal policy, with particular emphasis on its call for a global fiscal expansion in the wake of the 2008 financial crisis—a seeming departure from the organization's long-held position that monetary policy, not fiscal policy, was the appropriate response to an economic slowdown. More specifically, it examines the IMF's views on how fiscal adjustment should be implemented across countries based on the state of their public finances, market pressures, and the state of the economy as well as the impact that fiscal adjustment would have on it. In countries that were not facing market pressures and had adopted credible medium-term fiscal adjustment plans, the IMF has recommended proceeding with deficit reduction at a steady, gradual pace, thus taking an intermediate position between the fiscal doves (who have argued that fiscal adjustment could be postponed altogether to provide continued support to demand) and the fiscal hawks (who have held that a front-loaded adjustment was needed to prevent a fiscal crisis.
