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Lessons From Failure: Fiscal Policy, Indulgence And Ideology


  • Simon Wren-Lewis

    (Economics Department and Merton College, University of Oxford


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.

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  • 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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    References listed on IDEAS

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    Cited by:

    1. Uxó González, Jorge & Álvarez, Ignacio & Febrero, Eladio, 2017. "Fiscal space on the eurozone periphery: The case of Spain," IPE Working Papers 84/2017, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. 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.
    3. David Cobham, 2012. "The past, present, and future of central banking," Oxford Review of Economic Policy, Oxford University Press, vol. 28(4), pages 729-749, WINTER.
    4. Catherine Mathieu & Henri Sterdyniak, 2013. "Do we need fiscal rules?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 189-233.
    5. Sanz Labrador, Ismael & Sanz-Sanz, José Félix, 2013. "Política fiscal y crecimiento económico: consideraciones microeconómicas y relaciones macroeconómicas," Macroeconomía del Desarrollo 134, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    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/eu4vqp9ompqllr09j0h168m2j is not listed on IDEAS
    8. repec:ces:ifodic:v:9:y:2011:i:3:p:16752099 is not listed on IDEAS
    9. André Grjebine, 2013. "L’Eurosystème: un mécanisme de transferts en faveur des pays déficitaires ? Le débat," Sciences Po publications info:hdl:2441/eo6779thqgm, Sciences Po.
    10. repec:ces:ifodic:v:9:y:2011:i:3:p:50-53 is not listed on IDEAS
    11. repec:ags:aaea07:383 is not listed on IDEAS
    12. 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.
    13. 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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