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The limits to fiscal stimulus

Buiter, Willem H. (2010) The limits to fiscal stimulus. Oxford Review of Economic Policy, 26 (1). pp. 48-70. ISSN 1460-2121

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Abstract

The paper considers the case for an internationally coordinated further fiscal stimulus during the second half of 2009. Although this makes some of the analysis period-specific, most of the issues and principles considered are timeless. For a fiscal stimulus to be both effective there must be idle resources due to a failure of effective demand. For it to be desirable, there must be no alternative policy instruments (including monetary policy) for boosting demand. There must be no complete financial crowding out and no complete direct crowding out, through Ricardian equivalence/debt neutrality, through Minsky equivalence or through a high degree of substitutability between private and public exhaustive expenditure in private preferences or production possibilities. Finally, for international coordination to be desirable, there must be cross-border externalities from national fiscal stimuli. The paper considers each of these conditions in turn.

Item Type: Article
Official URL: http://oxrep.oxfordjournals.org/
Additional Information: © The Author 2010. Published by Oxford University Press.
Library of Congress subject classification: H Social Sciences > HJ Public Finance
Sets: Departments > European Institute
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: UT ISI:000277732100006
Date Deposited: 15 Jun 2010 09:56
URL: http://eprints.lse.ac.uk/28352/

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