NIESR: Fiscal Policy after the Referendum

31 Oct 2016 11:52 AM

In the Commentary of the November 2016 National Institute Economic Review no 238, Director Professor Jagjit Chadha examines the question of how a new the fiscal framework might address the challenges raised by the decision to leave the EU.

Jagjit Chadha said: “The government may be tempted to use fiscal policy to offset a future slowdown but caution must be exercised. Public debt levels are already high and risk premia have been far from eradicated. The Bank of England is the largest single holder of UK debt and that starts to erode the distinction between monetary and fiscal policy to the point where it is hard to see much of a difference".

He added: “We need to think about a fiscal framework that explains ‘misses’ from previously announced plans but promotes a sense of ‘timeless’ fiscal sustainability. The fiscal framework is in need of attention before policy can be asked to allow debt to deviate for long periods from what we may think is normal. Ultimately, rather than a rule for deficits we need an architecture for managing debt”.

Read full commentary here.

Notes for editors:

This press release is based on an article entitled “Fiscal Policy after the Referendum”, written by Director Jagjit Chadha, published in the National Institute Economic Review No. 238 November2016.

This journal is a quarterly, peer reviewed, economic and social sciences journal. The full Review is published from midnight on Wednesday 3 August.

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