NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Rethinking the Role of Fiscal Policy

Martin S. Feldstein

NBER Working Paper No. 14684*
Issued in January 2009
NBER Program(s):   EFG    PE

As recently as two years ago there was a widespread consensus among economists that fiscal policy is not useful as a countercyclical instrument. Now governments in Washington and around the world are developing massive fiscal stimulus packages, supported by a wide range of economists in universities, governments, and businesses.

Why has this change occurred? What are the principles for designing a potentially useful fiscal stimulus? And what will happen if the current fiscal stimulus fails?

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