Fiscal stimulus is very topical worldwide, with the new US President Joe Biden proposing a US$1.9 trillion COVID relief and stimulus package. And, in Australia, there is a debate occurring over how to support the tourism sector once JobKeeper finishes at the end of March. In Episode 73 of my Economics Explored podcast, I discuss fiscal stimulus with Professor Fabrizio Carmignani, Dean (Academic) of Griffith Business School. Highlights of our conversation include:
- how the size of the multiplier (and the degree of “crowding out”) varies with the state of the economy (from about 7:00);
- how governments really do need to run surpluses (or, at worst, very small deficits) when the economy recovers so the debt-to-GDP ratio can be stabilised and reduced in the long-term (discussion from around 14:15);
- how Modern Monetary Theory (MMT) is “a repackaging of traditional Keynesian theory, under very specific conditions” and why it shouldn’t guide macroeconomic policy (from around 20:35); and
- how vouchers may be a more effective stimulus than cash handouts (relevant discussion begins around 25:00).
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