Book analyzes tax policies post 2008 crisis and their economic impacts
The economic crisis that hit the world in 2008 forced nations to come up with strategies for their monetary policies in order to survive. Most countries have opted to reduce the basic interest rate to recover the economy, but that was not the only measure adopted. The paths followed by the United States, England, Ireland, countries in the Euro zone, and Brazil are detailed in the book ‘Política Fiscal e Ciclos Econômicos: Teoria e a Experiência Recente’ [Fiscal Policy and Economic Cycles: Recent Theory and Experience], which will be launched in Brasilia on September 13, at 7 p.m., at Livraria Cultura (Casa Park – SGCV – Sul, Lote 22 – Piso 2 – Loja 4), by FGV’s Brazilian Institute of Economics (IBRE).
Written by IBRE researcher and economist Manoel Pires, the book brings back the debate on monetary and fiscal policy, analyzing different experiences from around the world.
“There are two accepted positions. The first is that countries should engage in fiscal expansion to increase aggregate demand, which is the most traditional approach. And some economists believe that, by opting for a fiscal contraction, confidence in the economy grows and interest rates fall, generating a better improvement than merely lowering interest rates through monetary policy – the expansionary fiscal contraction thesis,” said the author about the book’s main topic of discussion.
Some of the contractionary measures include setting a spending ceiling and implementing economic reforms. The expansionary view favors higher investments. According to Pires, the analysis of each case showed that the adopted strategy had more to do with the country’s current economic scenario than a deliberate economic policy decision.
“Many countries that adopted expansionary fiscal contraction had a problem with very high indebtedness, and in this case the strategy was almost mandatory. The fiscal contraction policy tends to be more successful when the country has other outlets for growth, such as exports, and certain preconditions, such as a downward trend in interest rates. It is important to set the conditions for the policy to be counter-cyclical,” said the researcher, who was Secretary of Economic Policy of the Ministry of Finance.
The book seeks to systematize these experiences, providing readers with documents, analytical readings, empirical and theoretical evidence regarding the debate on fiscal policies.
Go to the website for more information on the book, available in Portuguese.