Department of Economics and Business Economics

Fiscal policy and the global financial crisis

Research output: Working paperResearch

Documents

  • Wp09 07

    Final published version, 143 KB, PDF document

  • School of Economics and Management
 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.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages36
Publication statusPublished - 2009

    Research areas

  • automatic stabilizers, discretionary policy, structural changes, labour market policy

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