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Nordic Economic Policy Review Number 1 / 2010

Fiscal Consequences of the Crisis

image of Nordic Economic Policy Review Number 1 / 2010

The Nordic Economic Policy Review is published by the Nordic Council of Ministers and addresses policy issues in a way that is useful for informed non-specialists as well as for professional economists. All articles are commissioned from leading professional economists and are subject to peer review prior to publication. The Nordic Economic Policy Review is published twice a year. The journal is distributed free of charge to members of the Nordic economic associations. The easiest way of subscribing to the NEPR is therefore to become a member of one of these associations, i.e., Denmark: Nationaløkonomisk Forening Finland: Taloustieteellinen Yhdistys Norway: Samfunnsøkonomene Sweden: Nationalekonomiska Föreningen For institutional subscriptions, please contact [email protected] Content: Introduction: Fiscal consequences of the crisis - Torben M. Andersen and Steinar Holden. Some lessons for fiscal policy from the financial crisis - Philip R. Lane. Fiscal policy and macroeconomic stability: New evidence and policy implications - Xavier Debrun and Radhicka Kapoor. Fiscal sustainability in the wake of the financial crisis - Torben M. Andersen. Fiscal policy and labor markets at times of public debt - Giuseppe Bertola. Fiscal costs of financial sector support: Measures and implications for fiscal policy - Daehaeng Kim and Manmohan S. Kumar. Monetary implications of the crisis: Dominance at stake - Charles Wyplosz. The Swedish fiscal policy framework - Robert Boije, Albin Kainelainen and Jonas Norlin.

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Fiscal sustainability in the wake of the financial crisis

The financial crisis affects public finances significantly, and adds to fiscal sustainability problems caused by future demographic changes. This paper discusses the problems in formulating an exit strategy for fiscal policy, focusing on the situation for the Nordic countries. Outset is taken in analyses of fiscal sustainability and it is examined to what extent they constitute a benchmark for formulating a consolidation/exit strategy for fiscal policy. Short-run stabilization concerns may be in conflict with the need to consolidate public finances. It is discussed to what extent such a dilemma exists due to expectations effects, persistence in employment and the specific policy changes undertaken to ensure fiscal sustainability. Fiscal policy targets and frameworks in the Nordic countries are also considered.

English

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