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Fiscal Stimulus Packages and Uncertainty in Times of Crisis – The Option of Waiting Can Be Valuable, Though!

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  • Belke, Ansgar

Abstract

Policymakers in the EU member states are currently shaping rescue packages to prevent the financial crisis hitting their economies with unmitigated force. Each government is responding to the emerging problems with a country-specific set of measures. Given the global nature of the crisis, would coordinated action at the European level not be a better approach? Was the German government - much-criticized for its initial reluctance to adopt massive fiscal stimulation measures - right after all to exploit the option value of waiting in a situation of high uncertainty? The answer to the second question is a qualified yes. However, the answer to the first one is more complex and crucially depends on how reasonable it appears to model the impact of the economic crisis as an exogenous demand shock which has hit the euro area countries.

Suggested Citation

  • Belke, Ansgar, 2009. "Fiscal Stimulus Packages and Uncertainty in Times of Crisis – The Option of Waiting Can Be Valuable, Though!," Ruhr Economic Papers 88, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:88
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    Citations

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    Cited by:

    1. Athanasios Tagkalakis, 2014. "Discretionary fiscal policy and economic activity in Greece," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(4), pages 687-712, November.
    2. Ansgar Belke, 2013. "Natural disaster in Japan: implications for world financial markets," Asia Europe Journal, Springer, vol. 11(4), pages 433-444, December.

    More about this item

    Keywords

    Policy co-ordination; fiscal multiplier; fiscal stimulus package; liquidity constraint; option value of waiting; uncertainty;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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