Journal Article

Aggregate fiscal policy under the Labour government, 1997–2010

Simon Wren-Lewis

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 29, issue 1, pages 25-46
Published in print January 2013 | ISSN: 0266-903X
Published online June 2013 | e-ISSN: 1460-2121 | DOI: https://dx.doi.org/10.1093/oxrep/grt012
Aggregate fiscal policy under the Labour government, 1997–2010

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  • National Budget, Deficit, and Debt
  • Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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This paper explores the Labour government’s fiscal policy performance at the macroeconomic level. This analysis is in two halves. The first covers the period up until the Great Recession, which involved a single policy regime subject to two simple fiscal rules. After discussing the theoretical and practical issues raised by these rules, I examine the extent to which they were followed by the government, and whether subsequent developments highlighted shortcomings of these rules. To what extent was the eventual failure of these rules down to over-optimistic forecasts or unforeseeable events? The second half involves the response to the Great Recession and the abandonment of the fiscal rules.

Keywords: fiscal policy; government deficit; government debt; fiscal rules; E62; H62; H68

Journal Article.  11278 words.  Illustrated.

Subjects: National Budget, Deficit, and Debt ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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