IMF research emphasises link between inflation and fiscal policy
Authors call for spending cuts and large, targeted wealth transfers to the poor
Authors with the International Monetary Fund find that since 1985, reducing fiscal spending by 1% of GDP reduces inflation by half-a-percentage point in advanced economies.
“When central banks act alone – without the support of fiscal policy – they need to hike interest rates substantially to fight inflation,” the researchers write. They are clear that monetary policy should be in “the driver’s seat” in tackling inflation. But in their blog post, published on April 3, they argue fiscal policy
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