scholarly journals THE NEW CONSENSUS UNDER STRESS: THE FINANCIAL CRISIS AND THE FISCAL POLICY COMEBACK

2020 ◽  
Vol 38 (75) ◽  
Author(s):  
Flávio Arantes ◽  
Antonio Carlos Macedo e Silva
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Economic Crisis ◽  
Public Debt ◽  
Window Of Opportunity ◽  
Paper Briefly ◽  
Economic Fundamentals ◽  
Stable Path ◽  
Policy Proposals

From the 1980s, mainstream macroeconomic thinking experienced a strongconvergence in methodological assumptions and policy proposals for more than twodecades. This “New Macroeconomics Consensus” was characterized by the role playedby the monetary policy in macroeconomic adjustment. Fiscal policy was set aside; itshould only be concerned with keeping public debt in a stable path in order to ensurethe “economic fundamentals”. However, the need for active and unconventionalpolicy measures during the 2008 global economic crisis brought fiscal policy back tothe mainstream debate. This paper briefly describes this convergence, discussing therole it assigned for fiscal policy before the crisis, and then examines the issues the postcrisis debate concentrated on, showing how it differs from the previous mainstreamconception of fiscal policy. We suggest that mainstream limitations to deal with fiscalpolicy may have opened a window of opportunity for a broader review of its role as apolicy tool.

Global Financial Crisis and Its Impact on Russia

2009 ◽  
pp. 9-27 ◽  
Author(s):  
A. Kudrin
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Central Bank ◽  
Global Financial Crisis ◽  
Developed Countries ◽  
Real Economy ◽  
Energy Prices ◽  
Russian Government ◽  
The Real

The article examines the causes of origin and manifestation of the current global financial crisis and the policies adopted in developed countries in 2007—2008 to deal with it. It considers the effects of the financial crisis on Russia’s economy and monetary policy of the Central Bank in the current conditions as well as the main guidelines for the fiscal policy under different energy prices. The measures for fighting the crisis that the Russian government and the Central Bank use to support the real economy are described.

scholarly journals Mistakes in the fiscal policy in Spain before the crisis

2013 ◽  
Vol 60 (5) ◽  
pp. 577-592 ◽  
Author(s):  
Jesús Ferreiro ◽  
Carmen Gómez ◽  
Felipe Serrano
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Economic Crisis ◽  
Public Expenditures ◽  
The Public ◽  
Made In

The paper analyses the mistakes made in the management of the fiscal policy in Spain before the crisis. The authors argue that the low size of the public expenditures, the adoption of a procyclical expansionary fiscal policy the years before the crisis, and the lack of a correct coordination between the Spanish fiscal policy and the ECB?s monetary policy, are key elements to understand the depth and length of the economic crisis and the current high fiscal imbalances in Spain.

scholarly journals RELATIVE EFFECTIVENESS OF INDONESIAN POLICY CHOICES DURING FINANCIAL CRISIS

2012 ◽  
Vol 14 (2) ◽  
pp. 177-219 ◽  
Author(s):  
Tumpak Silalahi ◽  
Tevy Chawwa
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Relative Effectiveness ◽  
Government Expenditure ◽  
Jel Classification ◽  
Exit Strategy ◽  
Economic Output ◽  
The Impact

The objective of this paper is to review the impact of crisis and policy measures taken during the crisis, to evaluate the effectiveness of those measures and to analyze the exit strategy in Indonesia. The econometric model was used to evaluate the impact of monetary and fiscal policy to economic output using quarterly data from 1990 - 2010. The result shows that monetary and fiscal policies have significant impact to economic output. In the short run the changes in real GDP is significantly affected by changes in real monetary supply in the previous three quarter and real fiscal expenditures. The lesson learned from this research among other are that cooperation and coordination among the policy makers and the timely responses are very important in tackling the crisis; an effective conventional monetary policy in normal times may become less effective in a crisis thus unconventional monetary policy indeed necessary as timely policy response and the improvement for more timely disbursement of government expenditure is important to increase the effectiveness of this policy to stimulate economic output. Moreover, several Indonesian exit strategy and policies to face future challenges are very important to reach the ultimate objective of sustainable economic growth while maintaining macroeconomic stability. JEL Classification : E52, E62, E63Keywords: monetary policy, fiscal policy, financial sector policy, global financial crisis.

scholarly journals THE IMPACT OF THE MONETARY - FISCAL POLICY MIX ON INVESTMENTS OF EURO AREA COUNTRIES IN THE CONTEXT OF THE FINANCIAL CRISIS

2012 ◽  
Vol 8 (1) ◽  
pp. 228-236
Author(s):  
Joanna Stawska
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Interest Rates ◽  
Euro Area ◽  
Debt Crisis ◽  
Policy Mix ◽  
Monetary Authorities ◽  
Recent Financial Crisis ◽  
The Impact

The study presents the impact of monetary-fiscal policy mix on economic growth, mainly for the investments of euro area in financial crisis. Fiscal policy and monetary policy play an important role in the economy, influencing each other and on a number of economic variables as well. In the face of the recent financial crisis, which turned into a debt crisis, fiscal and monetary authorities have been working together to revive economic activity. There was a significant economic impact on the level of government investments. The central bank kept interest rates at very low levels and used nonstandard instruments of monetary policy. Fiscal authorities have increased government spending to stimulate investment and economic recovery. The paper concludes that the management of the fiscal and monetary authorities in a crisis situation has been modified compared to the period before the crisis, when the coordination of these policies was clearly weaker.

scholarly journals Macroeconomic Policy at a Crossroads

2021 ◽  
Vol 65 (7) ◽  
pp. 5-15
Author(s):  
A. Kholopov
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Interest Rates ◽  
Public Debt ◽  
Financial Stability ◽  
Macroeconomic Policy ◽  
Bank Lending ◽  
Central Banks ◽  
Fiscal Stimulus ◽  
Negative Interest Rates

The article examines macroeconomic policy options for advanced economies to respond to adverse shocks in the environment of very low interest rates and very high levels of public debt, when the scope for using conventional policy tools is limited. The standard transmission mechanism of monetary policy in the ELB conditions stops working normally, and the economy faces the “liquidity trap” effect. The deployment by central banks of unconventional monetary tools (forward guidance, quantitative easing, and negative interest rates) after global financial crisis was helpful in combatting the downturn, but carries risk of possible side effects. Large-scale purchases of financial assets lead to significant increase in central banks’ balance sheets, and this creates a threat to future financial stability and central bank independence. Negative interest rates can have detrimental effects on bank profitability and be contractionary through bank lending. There is a consensus that today fiscal policy has to play a major role in stabilizing the business cycle. But the effectiveness of conventional tools of discretional fiscal policy is uncertain because of long political lags and small spending multiplier. Existing automatic fiscal stabilizers are focused on social protection goals and not on macroeconomic stabilization. Thus, the newly proposed measures for rules-based fiscal stimulus (asymmetric semiautomatic stabilizers – tax or spending measures triggered by the crossing of some statistical threshold, e.g. a high unemployment rate) and unconventional fiscal policy (the use of consumption taxes to increase inflation expectations) have become the object of active discussion. Here lies the danger in the fusion of monetary and fiscal policy: central banks’ operations are becoming increasingly quasi-fiscal, aimed at financing budget deficit, and functions of monetary policy are proposed to assign to fiscal policy. Besides, the expansion of fiscal stimulus threatens financial stability in the future, as it leads to increase in public debt and narrows a country’s fiscal space.

Empirical appraisal of fiscal stability: the case of Ghana

2015 ◽  
Vol 42 (5) ◽  
pp. 753-779
Author(s):  
Nana Kwame Akosah
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Fiscal Policy ◽  
Central Bank ◽  
Public Debt ◽  
Inflation Targeting ◽  
Fiscal Sustainability ◽  
Content Type ◽  
Quarterly Data ◽  
Poor Countries

Purpose – The purpose of this paper is to appraise the stability of Ghana’s fiscal policy by assessing government’s reaction in the past to rising public debt over the last three decades. Design/methodology/approach – Using quarterly data spanning 1990Q1-2013Q2, the study evaluated the mean reverting properties of Ghana’s public debt and also estimate the fiscal policy reaction function. The complementary estimation techniques include Pesaran et al. (2001) bound testing cointegration test, differencing method and also Granger two-step cointegration methods. Findings – Using quarterly data from 1990Q1 to 2013Q2, the study found the fiscal policy to be unstable in the 1990s, necessitating the adoption of Heavily Indebted Poor Countries’ initiative in 2001. The fiscal situation however relatively stabilizes afterwards following the external debt relief in 2001. Nevertheless, the study reveals that the recent fiscal policy (since 2006) seems to be confronted with tremendous fiscal pressures, exacerbated by fiscal excesses during election cycles as well as excessive domestic and external borrowings. In addition, the economic growth-debt link was found to be weak, though debt appears to adversely affect economic growth. Research limitations/implications – The study does not thoroughly explore the possibility of non-linear relationship between public debt and primary balance. Also, the result could be different using different data frequencies. Practical implications – The state of government finance has implications on the monetary policy and economic growth prospects of an economy. As an inflation targeting central bank since 2002, a successful monetary policy implementation that reins in inflation requires fiscal policy that curtails fiscal volatilities originating from imprudent behaviour of government. Therefore, the looming fiscal pressures in recent times would impair the effective implementation of the inflation targeting framework by the central bank, and also retard economic growth as the bulk of these expenditures are usually recurrent in the case of Ghana. Originality/value – This is the first paper to employ complementary econometric techniques to empirically evaluate fiscal sustainability in Ghana.

Liquidity, Monetary Policy, and the Financial Crisis: A New Monetarist Approach

2012 ◽  
Vol 102 (6) ◽  
pp. 2570-2605 ◽  
Author(s):  
Stephen D Williamson
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Financial Frictions ◽  
Open Market ◽  
Public And Private ◽  
Liquidity Trap ◽  
Friedman Rule ◽  
Crisis Phenomenon ◽  
Asset Purchases

A model of public and private liquidity integrates financial intermediation theory with a New Monetarist monetary framework. Non-passive fiscal policy and costs of operating a currency system imply that an optimal policy deviates from the Friedman rule. A liquidity trap can exist in equilibrium away from the Friedman rule, and there exists a permanent nonneutrality of money, driven by an illiquidity effect. Financial frictions can produce a financial-crisis phenomenon that can be mitigated by conventional open market operations working in an unconventional manner. Private asset purchases by the central bank are either irrelevant or they reallocate credit and redistribute income. (JEL E13, E44, E52, E62, G01)

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