Is There a Stabilizing Role for Fiscal Policy in the New Consensus?

Mark Setterfield

Review of Political Economy, 2007, vol. 19, issue 3, 405-418

Abstract: This paper considers the possibility of using fiscal rather than monetary policy as the instrument of stabilization policy in a new consensus framework. Describing the conduct of fiscal policy in terms of a 'pseudo Taylor rule', it is shown that fiscal policy is as, if not more, effective than monetary policy as a tool for macroeconomic stabilization. The conclusion reached is that the comparative neglect of fiscal policy as an instrument of stabilization policy in new consensus macroeconomics is unwarranted.

Date: 2007
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DOI: 10.1080/09538250701453105

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