Fiscal policy played a critical role in the aftermath of the global economic crisis. Large countercyclical fiscal stimuli—previously considered a tool that only advanced economies could use—became acceptable in developing economies. Most governments had only modest fiscal space, but the need to bolster domestic and global demand was considered urgent.
The role of fiscal policy has shifted—mostly expanded—in other ways as well. Today, many advocates see fiscal policy as helpful in reversing productivity slowdown, offsetting the effects of demographic trends, reorganizing economic structures, spurring innovation, and achieving stronger and sustainable growth. With a preponderant share of economists in favor of activist fiscal policies, those favoring structural reforms and supply-side policies to address these issues are decidedly in the minority.
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