A review and research agenda of fiscal policy post 2008 financial crisis

ABSTRACT

The financial crisis of 2008 has exploded the government debt levels and brought fiscal policy to the forefront of policy debates. The environment of interest rate close to zero bound, with the tumbling financial markets revamped the importance of fiscal policy in stimulating the economy. In addition to this, the Covid-19 pandemic has also intensified the urgency of fiscal policy action. In this article, the academic literature on fiscal policy was examined in light of developments that took place post-2008 financial crisis. Following a concept-based methodology, the paper clustered the fiscal policy literature under three heads 1) cyclical pattern of fiscal policy;2) fiscal consolidation strategies;3) effectiveness of fiscal policy. The study provides an insight into the importance of countercyclical fiscal policy especially during health emergencies such as Covid-19 pandemic that would be required to promote the economic development of the society as a whole.