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How Stimulative Has Fiscal Policy Been Around the World?

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  • Esteban Caldentey
  • Matías Vernengo

Abstract

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.

Suggested Citation

  • Esteban Caldentey & Matías Vernengo, 2010. "How Stimulative Has Fiscal Policy Been Around the World?," Challenge, Taylor & Francis Journals, vol. 53(3), pages 6-31.
  • Handle: RePEc:mes:challe:v:53:y:2010:i:3:p:6-31
    DOI: 10.2753/0577-5132530301
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    References listed on IDEAS

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    1. M. Woodford., 2010. "Convergence in Macroeconomics: Elements of the New Synthesis," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 10.
    2. Frank Smets & Rafael Wouters, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," American Economic Review, American Economic Association, vol. 97(3), pages 586-606, June.
    3. Eichenbaum, Martin, 1997. "Some Thoughts on Practical Stabilization Policy," American Economic Review, American Economic Association, vol. 87(2), pages 236-239, May.
    4. Seater, John J, 1993. "Ricardian Equivalence," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 142-190, March.
    5. Selma Mahfouz & Richard Hemming & Michael Kell, 2002. "The Effectiveness of Fiscal Policy in Stimulating Economic Activity; A Review of the Literature," IMF Working Papers 02/208, International Monetary Fund.
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