The Impact of the Great Recession on Monetary and Fiscal Policy in Developed Market Economies

• Authors: Damir Šehović
• Languages of publication: EN

Abstracts

EN

Background: With the occurrence of the crisis in 2007, which caused the largest economic contraction since the Great Depression in the thirties, it has become evident that the previous understanding of strategies, effects and roles of monetary and fiscal policy should be redefined. Objectives: The aim of this paper is to illustrate a possible expected change in monetary and fiscal policy in developed market economies that could occur as a consequence of the Great Recession. Methods/Approach: The paper provides a comparative analysis of various primary economic variables related to the developed OECD countries, as well as the empirical testing of the selected theoretical assumptions. Results: The changes in monetary policy refer to the question of raising target inflation, considering a possible use of aggregate price level targeting and paying attention to the role of central banks in suppressing the formation of an asset bubble. The success of fiscal policy in attaining stabilization depends on the size of possible fiscal measures and creation of automatic stabilizers. Conclusions: For the most part, monetary and fiscal policies will still stay unchanged, although some segments of these policies need to be improved.

Keywords

EN

the Great Recession; monetary policy; fiscal policy; flexible inflation targeting; asset bubble; fiscal space; automatic stabilizers

• Publisher: Sciendo
• Journal: Business Systems Research Journal
• Year: 2015
• Volume: 6
• Issue: 1
• Pages: 56-71

Dates

published

2015-03-01

received

2014-03-01

accepted

2014-09-28

online

2015-05-09

Contributors

author

Damir Šehović

• University of Montenegro, Faculty of Economics, Podgorica, Montenegro

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Identifiers

DOI

10.1515/bsrj-2015-0004