The Effectiveness of Fiscal Policy in Combating Economic Crisis. An Analysis Based on the Economic Literature
The objective of this research is to identify, in the economic literature, the main factors which constrain the transmission of the fiscal shocks to the real economy. The interest in finding the most efficient fiscal stimuli in recovery the economies passing through crisis period has got increased a...
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2010-11-01
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| Series: | Theoretical and Applied Economics |
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| Online Access: |
http://store.ectap.ro/articole/527.pdf
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| Summary: | The objective of this research is to identify, in the
economic literature, the main factors which constrain the transmission of
the fiscal shocks to the real economy. The interest in finding the most
efficient fiscal stimuli in recovery the economies passing through crisis
period has got increased as soon as the expansionary monetary policy
promoted by most of the central banks has not generated an increase of
the confidence in the private economic agents and, as a consequence, an
increase of consumption and of the private investments. Even though it
represents the Keynesian solution for recovery the economies which have
been affected by the crisis, the fiscal expansion promoted during the
recession periods does not generate the same expected positive effects
any more (increase of consumption, significant decrease of
unemployment, increase of revenues in economy), as they are conditioned
by the reaction of the private economic agents to the fiscal stimuli. For
example, the decision to decrease taxation may not automatically
generate the significant increase of consumption (a condition for
spreading the multiplier effect in economy), under the terms of pessimism
or of the difficulty to access loans. As a result, the fiscal multipliers tend
to be rather proper, and their value decreases more during the deep
economic recession periods. |
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| ISSN: | 1841-8678 1844-0029 |