Post-Crisis Fiscal Policy

Fiscal policy makers have faced an extraordinarily challenging environment over thelast few years. At the outset of the global financial crisis, the International Monetary Fund (IMF)for the first time advocated a fiscal expansion across all countries able to afford it, a seemingdeparture from the long-held consensus among economists that monetary policy rather than fiscalpolicy was the appropriate response to fluctuations in economic activity. Since then, the IMF hasemphasized that the speed of fiscal adjustment should be determined by the specific circumstances ineach country. Its recommendation that deficit reduction proceed steadily, but gradually, positionsthe IMF between the fiscal doves (who argue for postponing fiscal adjustment altogether) and thefiscal hawks (who argue for a front-loaded adjustment). This volume brings together the analysisunderpinning the IMF's position on the evolving role of fiscal policy.

Afterestablishing its analytical foundation, with chapters on such topics as fiscal risk and debtdynamics, the book analyzes the buildup of fiscal vulnerabilities before the crisis, presents thepolicy response during the crisis, discusses the fiscal outlook and policy challenges ahead, andoffers lessons learned from the crisis and its aftermath. Topics discussed include a historical viewof debt accumulation; the timing, size, and composition of fiscal stimulus packages in advanced andemerging economies; coordination of fiscal and monetary policies; the sovereign debt crisis inEurope; and institutional reform aimed at fostering fiscal discipline.

ContributorsAli Abbas, Nate Arnold, Aqib Aslam, ThomasBaunsgaard, Nazim Belhocine, Dora Benedek, Carlo Cottarelli, Petra Dacheva, Mark De Broeck, XavierDebrun, Asmaa ElGanainy, Julio Escolano, Lorenzo Forni, Philip Gerson, Borja Gracia,, MartineGuerguil, Alejandro Guerson, Laura Jaramillo, Jiri Jonas, Mika Kortelainen, Manmohan Kumar,Suchitra, Kumarapathy, Douglas Laxton, Pablo Lopez-Murphy, Thornton Matheson, Jimmy McHugh, UffeMikkelsen, Kyung-Seol Min, Aiko Mineshima, Marialuz Moreno, John Norregaard, Ceyla Pazarbasioglu,Iva Petrova, Tigran Poghosyan, Marcos Poplawski-Ribeiro, Anna Shabunina, Andrea Schaechter, JackSelody, Abdelhak Senhadji, Baoping Shang, Mauricio Soto, Bruno Versailles, Anke Weber, Jaejoon Woo,Li Zeng

Carlo Cottarelli is Director and Philip Gerson is Deputy Director of the International Monetary Fund's European Department. Abdelhak Senhadji is Chief of a Fiscal Operations Division at the International Monetary Fund.