How Stimulative Has Fiscal Policy Been Around the World?
So a student asked me if I wrote something about how fiscal policy should have been more stimulative after the crisis. The paper written in 2010 with Esteban Pérez seems to hold well after more than 4 years. From Challenge Magazine's short intro:
The current credit crisis and worldwide policy response have resurrected the reputation of fiscal policy. But the authors contend that it is still widely misunderstood. Many of those who now support fiscal stimulus—such as more government spending—have a limited view of its usefulness, one advocated by the pre-Friedmanite economists of the University of Chicago. It stands in contrast to the more thorough Keynesian revolution, which they argue now more than ever needs to be understood. The result has been far smaller fiscal stimulus packages than are necessary to return nations to rapid growth.I still like more the original title: All is quiet on the fiscal front. We were worried that fiscal stimulus was not big enough, and concerned that the IMF and governments were overly optimistic about the economy's tendency to full employment. Sounds about right. The Keynesian moment was short lived indeed.