Friday, December 22, 2017

The IMF and fiscal policy

This is a topic I discussed several times here (for example, here, here, here, here or here). Now there is a paper by Marc Lavoie (with co-author) in Intervention, on the same topic. The paper notes that: "There is a paper by Vernengo/Ford (2014) that covers some of the same ground. Their conclusion is that the 2008 crisis prompted only some cautious change in the views being entertained at the IMF" (my paper with Kirsten is here). Just to clarify, that's not exactly our point. The point we make is that while the research department has changed some of their views, without discarding the crucial concept of the natural rate of unemployment in their analytical framework, the policies pursued by the IMF changed very little indeed. So that there is a kind of double discourse. I referred to something like that within the mainstream of the profession as organized hypocrisy. Double discourse in theory, with no significant change in the theories that underlie the policy, and almost no change in policy.* At any rate, as anything that Marc writes this paper is worth your time and attention.

* In our intro we say: "It is concluded that even a most optimistic reading of IMF reports and country arrangements disappoints. The power structure ultimately remains the same: the Fund continues to be the mechanism through which creditor countries enforce contractionary policy on indebted countries." So, in our view, nothing really changed. more window dressing than anything else going on.

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