Fiscal policy: A strong macroeconomic role

35Citations
Citations of this article
54Readers
Mendeley users who have this article in their library.

Abstract

Current macroeconomics, the ‘New Consensus Macroeconomics’, downgrades significantly the role of fiscal policy as a stabilisation instrument of macroeconomic policy. This paper argues that fiscal policy deserves to be properly upgraded. More recent theoretical and empirical developments on the fiscal policy front are closely examined. This examination reveals that these developments lead to the conclusion that fiscal policy is not as ineffective as argued by the ‘New Consensus Macroeconomics’ proponents. On the contrary, it has a strong macroeconomic role. It is also the case that, in view of the ‘Great Recession’, financial stability has been shown to be very important in economic policy but had been ignored prior to it. The paper argues strongly that fiscal policy is actually a strong macroeconomic stabilisation instrument, especially so when it is coordinated not only with monetary policy but also and closely with financial stability policies – with such coordination-embracing income distribution. Fiscal policy should thereby be restored to its proper upgraded role in terms of economic policy. It is, therefore, high time economists and economic policymakers turned their attention more closely and seriously to this aspect and restored fiscal policy to its strong macroeconomic role.

Cite

CITATION STYLE

APA

Arestis, P. (2012). Fiscal policy: A strong macroeconomic role. Review of Keynesian Economics, (1), 93–102. https://doi.org/10.4337/roke.2012.01.06

Register to see more suggestions

Mendeley helps you to discover research relevant for your work.

Already have an account?

Save time finding and organizing research with Mendeley

Sign up for free