Saturday, October 3, 2009

Liveblogging from seminar Fiscal Policy During Crisis and Recovery

Praised Fund's need for fiscal expansion- would have been as deep if not so good intellectual work.
Q. Does debt threaten macho and fiscal stability?
A: very country specific. UK, US, JP debt gdp ratios projected scary! But EM projections in G-20 likely decline in long run.
Q. How get them down?
A. Fund proposed many rules. WWII good example, but some differences. There will have to tax inc., bigger red in spending. In EM, problem much much smaller. Consolidation will req. Delicate mix of exit from fis. And mon. Policy. Doug XXXX has nice ppt on multipliers, and mon. Pol. Makes a big difference in effectiveness of fiscal policy.
Coordination Issue: was essential when world facing collapse when faced with son of great depression:) it is not as critical now as less than a year ago (I need to expand on that).
Then, he discussed Israel: lesson: we were in strong position when crisis began. Not that fiscal policy doesn't matter but how you go in determines how rapidly you go out. I hope Fund goes to help put fiscal houses in order...

We have boring fin system, was criticism, now compliment.
Will discuss how we got fiscal sustain ability.
Do budget annually on January
Moved quickly from surplus to deficit: reduce taxes, spending for job losing people, workshare programs.
Our lesson: 70sa we had deficit spending and public debt, accepted by public until noticed that tax money was going to interest.
Discipline and we had balance budgets. They use private sector forecasts for growth- has brought credibility to projections, now changing because hardly a consensus.
Use it or lose it policy to funding to regions,Temp measures to unemployed: half of deficit. For two years then we depend on growth, if growth less, we cut spending.
I encourage you to contain spending (advice to PM).

RWANDA minister or economic planning:
Not many notes as a result of massacre of Shakespearian and my own Inonu-like hearing problems. sorry:(....
What to do with limited needs?

Alejandro (MEXICO, ex-IMF)
I will talk about general fiscal policy, exit strategies and Mexico.
Key Idea in stimulis frameworks to concentrate on hardest-hit. Put this in programs right now so to be ready for next crisis.
Calculate steady state debt dynamics- measure fiscal adjustment, how we'll reach new steady state. Put adjustment ASAP. Optimal design. Frontload these because 1. political will to sustain these, sooner we cut, better 2. Credibility effects for LR adjustments. 3. Uncertainty of adjustment will effect private sector decisions. So accelerate design and discussion of programs- exit strategies. Mexico: severely hit by recession, gdp contraction like TR (keske bizde de boyel adam olsaydi). We were liq,but had solvency issues. We face fiscal problem associated with decline production of oil. So we have temporary and permanent shocks. Transitory will be done with deficit and nonrecurrent revenues. Permanent by increase in non-oil revenues, so increase income tax. We protect anti-poverty and infrastructure problems to compensate effects of recession.

Q: PM complaining about CBT independence. Gov does MTFR, fiscal rule? Is priority fiscal rule or creating jobs. Questioner CHP MP, I think.
A.SF:I don't follow Turkey closely anymore. Current priority is to get out of recession.

Q. What policies should be used by G-20?
A. Canada: coordination.

Q: what about exit? Are there objective criteria for exit.
A. Canada: when is when we see recovery for sure- sustained growth for a couple of quarters before implement exit strategy. Mexico: country-specific, need to balance out.
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