Nordic Economic Policy Review Number 1 / 2010

Fiscal Consequences of the Crisis

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The Nordic Economic Policy Review is published by the Nordic Council of Ministers and addresses policy issues in a way that is useful for informed non-specialists as well as for professional economists. All articles are commissioned from leading professional economists and are subject to peer review prior to publication. The Nordic Economic Policy Review is published twice a year. The journal is distributed free of charge to members of the Nordic economic associations. The easiest way of subscribing to the NEPR is therefore to become a member of one of these associations, i.e., Denmark: Nationaløkonomisk Forening Finland: Taloustieteellinen Yhdistys Norway: Samfunnsøkonomene Sweden: Nationalekonomiska Föreningen For institutional subscriptions, please contact [email protected] Content: Introduction: Fiscal consequences of the crisis - Torben M. Andersen and Steinar Holden. Some lessons for fiscal policy from the financial crisis - Philip R. Lane. Fiscal policy and macroeconomic stability: New evidence and policy implications - Xavier Debrun and Radhicka Kapoor. Fiscal sustainability in the wake of the financial crisis - Torben M. Andersen. Fiscal policy and labor markets at times of public debt - Giuseppe Bertola. Fiscal costs of financial sector support: Measures and implications for fiscal policy - Daehaeng Kim and Manmohan S. Kumar. Monetary implications of the crisis: Dominance at stake - Charles Wyplosz. The Swedish fiscal policy framework - Robert Boije, Albin Kainelainen and Jonas Norlin.



The Swedish fiscal policy framework

The unfavourable development of public finances in many European Union countries during the current economic crisis has renewed the discussion on the need to strengthen the Stability and Growth Pact (SGP). Besides suggestions on how the pact itself can be strengthened, the importance of national fiscal policy frameworks has been emphasized. The Swedish experience is interesting in this context. As one of few EU countries during the present crisis, Sweden has been able to combine significant fiscal stimuli with limited deficits in the public finances. Deficit and debt levels have also stayed below the levels set by the SGP. It was the ability to maintain surpluses during the good pre-crisis years that made this possible. For this, the existence of a well-defined national fiscal policy framework, combined with a strong political commitment, has been essential. The fiscal policy framework consists of a surplus target for general government, an expenditure ceiling for central government combined with a stringent top-down budget process, a budget-balance requirement on local governments and a Fiscal Policy


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