Duncan’s Economic Blog

Ten Commandments for Fiscal Adjustment

Posted in Uncategorized by duncanseconomicblog on July 15, 2010

Over at the IMF blog, Oliver Blanchard has set out “ten commandments for fiscal adjustment in advanced economies”.

Go read the post – there’s a paragraph on each one. I don’t entirely agree – but the rules are a good starting point for debate and very different from the path outlined by the budget.

Commandment I: You shall have a credible medium-term fiscal plan with a visible anchor (in terms of either an average pace of adjustment, or of a fiscal target to be achieved within four–five years).

Commandment II: You shall not front-load your fiscal adjustment, unless financing needs require it.

Commandment III: You shall target a long-term decline in the public debt-to-GDP ratio, not just its stabilization at post-crisis levels.

Commandment IV: You shall focus on fiscal consolidation tools that are conducive to strong potential growth.
Commandment V: You shall pass early pension and health care reforms as current trends are unsustainable.

Commandment VI: You shall be fair. To be sustainable over time, the fiscal adjustment should be equitable.

Commandment VII: You shall implement wide reforms to boost potential growth.

Commandment VIII: You shall strengthen your fiscal institutions.

Commandment IX: You shall properly coordinate monetary and fiscal policy.

Commandment X: You shall coordinate your policies with other countries.

Interestingly enough this chimes with Hopi’s thoughts.


2 Responses

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  1. Thomas said, on July 19, 2010 at 8:59 pm

    Out of 10, how would you mark the Coalition against these Commandments?

    • duncanseconomicblog said, on July 20, 2010 at 12:45 pm

      5 and a half.

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