The global fiscal response to COVID-19: Risks and repercussions

Article


Makin, Anthony J. and Layton, Allan. 2021. "The global fiscal response to COVID-19: Risks and repercussions." Economic Analysis and Policy. 69, pp. 340-349. https://doi.org/10.1016/j.eap.2020.12.016
Article Title

The global fiscal response to COVID-19: Risks and repercussions

ERA Journal ID18341
Article CategoryArticle
AuthorsMakin, Anthony J. (Author) and Layton, Allan (Author)
Journal TitleEconomic Analysis and Policy
Journal Citation69, pp. 340-349
Number of Pages10
Year2021
PublisherElsevier
Place of PublicationAustralia
ISSN0313-5926
Digital Object Identifier (DOI)https://doi.org/10.1016/j.eap.2020.12.016
Web Address (URL)https://www.sciencedirect.com/science/article/pii/S031359262030463X
Abstract

Governments around the world responded to the COVID19 crisis (CVC) by aggressively deploying fiscal policy to boost health expenditure, income transfers and increased welfare payments, as well as wage subsidies to firms to retain employees to minimize short term unemployment. A fiscal response was in principle both necessary and timely, but the nature of the responses adopted by governments differed markedly around the world. After describing the global macroeconomic impact of the CVC and its effect on budget deficits and public debt levels, this paper critically evaluates the global fiscal response with reference to comparable historical episodes. The analysis suggests some fiscal responses were too expansive and of the wrong form. The paper then highlights the future macroeconomic risks arising from the highly elevated public debt levels the CVC has caused, concluding that fiscal consolidation rather than further fiscal ‘stimulus’ will be needed to address the parlous fiscal legacy of the crisis.

KeywordsCOVID 19 crisis, Fiscal policy response, Public debt
ANZSRC Field of Research 2020380112. Macroeconomics (incl. monetary and fiscal theory)
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Byline AffiliationsGriffith University
University of Southern Queensland
Institution of OriginUniversity of Southern Queensland
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