Journal Article

The limits to fiscal stimulus

Willem H. Buiter

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 26, issue 1, pages 48-70
Published in print January 2010 | ISSN: 0266-903X
Published online January 2010 | e-ISSN: 1460-2121 | DOI: https://dx.doi.org/10.1093/oxrep/grp038
The limits to fiscal stimulus

More Like This

Show all results sharing these subjects:

  • Economic Development and Growth
  • Public Economics
  • Political Economy
  • Public Policy

GO

Show Summary Details

Preview

The paper considers the case for an internationally coordinated further fiscal stimulus during the second half of 2009. Although this makes some of the analysis period-specific, most of the issues and principles considered are timeless. For a fiscal stimulus to be both effective there must be idle resources due to a failure of effective demand. For it to be desirable, there must be no alternative policy instruments (including monetary policy) for boosting demand. There must be no complete financial crowding out and no complete direct crowding out, through Ricardian equivalence/debt neutrality, through Minsky equivalence or through a high degree of substitutability between private and public exhaustive expenditure in private preferences or production possibilities. Finally, for international coordination to be desirable, there must be cross-border externalities from national fiscal stimuli. The paper considers each of these conditions in turn.

Keywords: fiscal policy; debt neutrality; Ricardian equivalence; Minsky neutrality; crowding out; debt sustainability; E4; E5; E6; F4; H3; H5; H6

Journal Article.  12053 words.  Illustrated.

Subjects: Economic Development and Growth ; Public Economics ; Political Economy ; Public Policy

Full text: subscription required

How to subscribe Recommend to my Librarian

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.