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description Journal article public Economic Affairs

Perspectives Fiscal Policy as a Stabilization Tool: Discretionary and Non Discretionary Policies

Swati Yadav
Published 17 Junho 2021

Abstract

Global financial crisis of 2008 and the Covid 19 led slowdown have brought Keynesian fiscal stabilization policies back to the forefront of all academic debates. But what the world is experiencing should be treated as an exceptional situation that should not be used to advance the case to fine-tune the economy every time using discretionary fiscal measures. The pre-crisis broad macroeconomic consensus still holds, and stabilization should first be left to monetary policy. On the fiscal front government should rely more on rule-based inbuilt stabilizers for short-term management of cyclical fluctuations in case of demand shocks and long-run fiscal policy should focus more on growth and developing enabling factors to attract more investment. Fiscal stabilizers on the expenditure side should be strengthened to provide an adequate safety net to economically vulnerable sections of the society.

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