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Lessons From Failure: Fiscal Policy, Indulgence And Ideology

Author

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  • Simon Wren-Lewis

    (Economics Department and Merton College, University of Oxford simon.wren-lewis@economics.ox.ac.uk)

Abstract

Macroeconomic theory clearly suggests that at the zero lower bound, fiscal contraction will reduce output and slow any recovery. Yet in 2010 the focus of fiscal policy in many countries switched from supporting activity to reducing debt, despite the fact that the recovery from recession often appeared weak. While high levels of public debt can explain this switch in some countries, it does not provide a satisfactory account in others. In addition, the possibility of using balanced budget fiscal expansion or tax switches that bring forward spending remain largely unexplored. This paper suggests that policy has been influenced by an opposition to countercyclical fiscal policy which has ideological roots.

Suggested Citation

  • Simon Wren-Lewis, 2011. "Lessons From Failure: Fiscal Policy, Indulgence And Ideology," National Institute Economic Review, National Institute of Economic and Social Research, vol. 217(1), pages 31-46, July.
    • Handle: RePEc:sae:niesru:v:217:y:2011:i:1:p:r31-r46
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    3. Catherine Mathieu & Henri Sterdyniak, 2012. "Faut-il des règles de politique budgétaire ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(7), pages 299-346.
    4. Simon Wren-Lewis, 2011. "Fiscal Councils: The UK Office for Budget Responsibility," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(03), pages 50-53, October.
    5. repec:spo:wpecon:info:hdl:2441/eo6779thqgm5r489maqa474kg is not listed on IDEAS
    6. Jonathan Portes & Simon Wren-Lewis, 2015. "Issues in the Design of Fiscal Policy Rules," Manchester School, University of Manchester, vol. 83, pages 56-86, September.
    7. repec:spo:wpecon:info:hdl:2441/dambferfb7dfprc9lip1oi0sn is not listed on IDEAS
    8. David Cobham, 2012. "The past, present, and future of central banking," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 28(4), pages 729-749, WINTER.
    9. Catherine Mathieu & Henri Sterdyniak, 2013. "Do we need fiscal rules?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 189-233.
    10. Anis Chowdhury & Iyanatul Islam, 2012. "The Debate on Expansionary Fiscal Consolidation: How Robust is the Evidence?," The Economic and Labour Relations Review, , vol. 23(3), pages 13-38, September.
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    15. Simon Wren-Lewis, 2013. "Macroeconomic Stabilisation in the Eurozone: Lessons from Failure," Global Policy, London School of Economics and Political Science, vol. 4, pages 66-73, July.
    16. Stefan Behrendt, 2013. "Monetary Transmission via the Central Bank Balance Sheet," Global Financial Markets Working Paper Series 49-2013, Friedrich-Schiller-University Jena.
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    18. repec:ces:ifodic:v:9:y:2011:i:3:p:50-53 is not listed on IDEAS
    19. Jorge Uxo & Ignacio Àlvarez & Eladio Febrero, 2017. "Fiscal space on the Eurozone periphery: The case of Spain," IMK Working Paper 176-2017, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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    21. repec:ces:ifodic:v:9:y:2011:i:3:p:16752099 is not listed on IDEAS
    22. Simon Wren-Lewis, 2011. "Fiscal Councils: The UK Office for Budget Responsibility," CESifo DICE Report, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 9(3), pages 50-54, October.
    23. Zoltán Szalai, 2012. "A crisis of crisis management? Debates over fiscal adjustments in the European Monetary Union," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 7(3), pages 57-66, October.

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