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Fiscal policy and the global financial crisis

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  • Torben M. Andersen

    () (School of Economics and Management, University of Aarhus, Denmark)

Abstract

The financial crisis raises demands for fiscal policy interventions. While a fall in aggregate demand is an important consequence of the crisis, it also reflects more underlying structural problems and changes. Hence, appropriate policy designs have to take account of the nature of the crisis and the underlying need for structural changes. While fiscal policy should mainly rely on automatic stabilizers in normal situations, a more active fiscal policy strategy is called for in the present situation. The effectiveness of various types of fiscal instruments and conceivable tensions between short and long-run objectives are discussed. Past experience shows that deep recessions become persistent due to marginalization of unemployed, and therefore labour market policies have to be considered as an integral part of policy packages. Finally the question of international policy coordination is addressed.

Suggested Citation

  • Torben M. Andersen, 2009. "Fiscal policy and the global financial crisis," Economics Working Papers 2009-07, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:aarhec:2009-07
    as

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    File URL: ftp://ftp.econ.au.dk/afn/wp/09/wp09_07.pdf
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    Cited by:

    1. Alymkulova Nargiza Bakytovna & Atabaev Nurlan Uzgenovich & Ganiev Junus Mashrapovich, 2016. "Var - analysis of Global financial economic crisis impact on public budget and unemployment: evidence from the economy of the Kyrgyz Republic," Экономика региона, CyberLeninka;Федеральное государственное бюджетное учреждение науки «Институт экономики Уральского отделения Российской академии наук», vol. 12(4), pages 1090-1101.
    2. Cristina Aurora Bunea-Bontas & Mihaela Cosmina Petre, 2010. "Fiscal Policy During The Current Crisis," Romanian Economic Business Review, Romanian-American University, vol. 5(4), pages 48-67, december.
    3. repec:eee:ecmode:v:65:y:2017:i:c:p:138-146 is not listed on IDEAS

    More about this item

    Keywords

    automatic stabilizers; discretionary policy; structural changes; labour market policy;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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