Reassessing Discretionary Fiscal Policy
Top Cited Papers
- 1 August 2000
- journal article
- Published by American Economic Association in Journal of Economic Perspectives
- Vol. 14 (3) , 21-36
- https://doi.org/10.1257/jep.14.3.21
Abstract
Recent changes in policy research and in policy-making call for a reassessment of countercyclical fiscal policy. Such a reassessment indicates that countercyclical fiscal policy should focus on automatic stabilizers rather than discretionary actions. Monetary policy has been reacting more systematically to output and inflation; long expansions in the 1980s and 1990s demonstrate policy effectiveness. It is unlikely that discretionary countercyclical fiscal policy could improve things, even with less uncertainty about fiscal impacts. A discretionary countercyclical fiscal policy could make monetary policy making more difficult. Discretionary fiscal policy should focus on long-run issues, such as tax reform and social security reform.Keywords
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