Reassessing Discretionary Fiscal Policy

John Taylor

Journal of Economic Perspectives, 2000, vol. 14, issue 3, 21-36

Abstract: Recent changes in policy research and in policy-making call for a reassessment of countercyclical fiscal policy. Such a reassessment indicates that countercyclical fiscal policy should focus on automatic stabilizers rather than discretionary actions. Monetary policy has been reacting more systematically to output and inflation; long expansions in the 1980s and 1990s demonstrate policy effectiveness. It is unlikely that discretionary countercyclical fiscal policy could improve things, even with less uncertainty about fiscal impacts. A discretionary countercyclical fiscal policy could make monetary policy making more difficult. Discretionary fiscal policy should focus on long-run issues, such as tax reform and social security reform.

JEL-codes: E62 N16 (search for similar items in EconPapers)
Date: 2000
Note: DOI: 10.1257/jep.14.3.21
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Citations: View citations in EconPapers (270)

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