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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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Monetary implications of the crisis: Dominance at stake

The paper asks whether the financial crisis is upsetting the struggle for dominance between monetary and fiscal policy. It argues that a crisis is indeed a key moment when challenges to monetary policy dominance are greatest. However, the need to bail out financial institutions blurs the distinction between monetary and fiscal policy. The subsequent shift to public debt stress further weighs on central banks. The paper also discusses the situation when the interest rate hits the zero lower bound.

English

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