Fiscal Stimuli: When, Why & How

Date Published: 
September, 2009
Document Author(s): 
CaPRI
Thematic Area: 

In a recent series of articles, CaPRI evaluated the management of the Jamaican economy by the Golding administration. This period was dominated by crisis-management, as exogenous shocks - first, a surge in global inflation due to rising commodity prices, then a collapse in global demand as the bubble burst - rocked the Jamaican economy. As we approach the end of 2009, the global economy appears to be stabilizing. The question now is what will follow? The debate in Jamaica continues to be dominated by what strategies the government should adopt to mitigate the onerous effects of what remains a very challenging and difficult economic time. Some are calling on the government to tackle Jamaica’s poor public finances, while others are demanding the implementation of a stimulus package to pull the country out of recession. The findings of this brief suggest that the case for a fiscal stimulus package is, on economic grounds, weak; while the case for deficit-reduction is strong. Increasing the deficit in order to stimulate the economy, will not likely lead to sustainable growth.