The GOVERNANCE blog

For thirty years before the global financial crisis, the International Monetary Fund upheld the view that fiscal policy was an ineffective tool for economic management. But the IMF changed its tune after 2008, sometimes challenging governments that were bent on austerity. In the current issue of Governance, Cornel Ban goes into the IMF’s “engine room” to explain how this change happened. The groundwork was laid because of growing rift among researchers about the significance of fiscal policy. But a critical factor was the appointment of a new managing director, Dominique Strauss-Kahn, in 2007, followed by a series of key personnel changes within the Fund. The result was “a virtual perestroika in the Fund’s fiscal policy doctrine.”  Read the article.