IMF: fiscal policies ineffective in stabilising economies
A paper published by the IMF provides evidence that fiscal stabilisation operates mainly through automatic stabilisers. The paper also posits that the destabilising impact of policy changes unrelated to the business cycle may not be as robust as suggested in previous literature.
The paper revisits the link between fiscal policy and macroeconomic stability. Two salient features of the analysis include a systematic test for the government's ambivalent role as a shock absorber and a shock inducer -
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