Fiscal policy and the Covid-19 pandemics: What’s new in the mainstream view?

Abstract

In this paper we map the debates on fiscal policy in the Economics mainstream that resulted from the Covid-19 crisis. We present the discussions around the following topics: (a) fiscal policy in a context of low interest rates; (b) the metrics for assessing the fiscal situation of a jurisdiction; (c) alternative fiscal frameworks such as semi-autonomous discretionary fiscal architecture or fiscal standards; and (d) the fiscal agenda in the most recent International Monetary Fund (IMF) publications. We argue that the acceptance of fiscal expansions in contexts of low interest rates – especially those focused on public investments that do not generate current expenditures – and the adoption of greater flexibility in the framework of fiscal rules in central countries reappear as important elements in the “new” framework of the mainstream. However, as far as developing economies are concerned, fiscalism persists and the “old convictions remain rooted” in the mainstream view.