Fortune, wrote Machiavelli five hundred years ago in The Prince, is like a violent river. She “shows her power where virtue has not been put in order to resist her and therefore turns her impetus where she knows that dams and dikes have not been made to contain her.” Managing the ebb and flow of government’s fiscal fortunes poses similar challenges today. We need a risk-based approach to fiscal policymaking that applies a systematic analysis of potential sources of fiscal vulnerabilities. This method would help countries detect potential problems early, and would allow for institutional changes to build resilience.
Filed under: Advanced Economies, Economic research, Emerging Markets, Finance, Financial Crisis, Fiscal, Fiscal policy, Government, growth, International Monetary Fund, Public debt, Reform | Tagged: euro area, Fiscal Monitor, fiscal policy, inflation, Japan, oil prices, public finances, spillover | Leave a comment »