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Is There a Stabilizing Role for Fiscal Policy in the New Consensus?

  • Mark Setterfield

This paper considers the possibility of using fiscal rather than monetary policy as the instrument of stabilization policy in a new consensus framework. Describing the conduct of fiscal policy in terms of a 'pseudo Taylor rule', it is shown that fiscal policy is as, if not more, effective than monetary policy as a tool for macroeconomic stabilization. The conclusion reached is that the comparative neglect of fiscal policy as an instrument of stabilization policy in new consensus macroeconomics is unwarranted.

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Article provided by Taylor & Francis Journals in its journal Review of Political Economy.

Volume (Year): 19 (2007)
Issue (Month): 3 ()
Pages: 405-418

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Handle: RePEc:taf:revpoe:v:19:y:2007:i:3:p:405-418
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