The IMF and the New Fiscalism: was there a U-turn?

Brett Fiebiger and Marc Lavoie
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Brett Fiebiger: University of Ottawa, Canada

European Journal of Economics and Economic Policies: Intervention, 2017, vol. 14, issue 3, 314-332

Abstract: In late 2008 a consensus was reached amongst global policymakers that fiscal stimulus was required to counteract the effects of the Great Recession, a view dubbed as the New Fiscalism. Pragmatism triumphed over the stipulations of the New Consensus Macroeconomics, which viewed discretionary fiscal actions as an irrelevant tool of counter-cyclical macroeconomic policy (if not altogether detrimental). The partial re-embrace of Keynes was however relatively short-lived, lasting only until early 2010 when fiscal consolidation came to the forefront again, although the merits of fiscal austerity were questioned when economic recovery did not really materialize in 2012. This paper traces the ups and downs of the debate over the New Fiscalism, especially at the International Monetary Fund, by analysing IMF documents and G20 communiqués. Using fiscal policy as a means to exit the crisis remains contentious even amidst recognition of secular stagnation.

Keywords: New Fiscalism; fiscal consolidation; expansionary austerity; functional finance; sound finance (search for similar items in EconPapers)
JEL-codes: E62 H6 (search for similar items in EconPapers)
Date: 2017
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Working Paper: The IMF and the new fiscalism: Was there a U-turn (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:elg:ejeepi:v:14:y:2017:i:3:314-332

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