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Progress and ConfusionThe State of Macroeconomic Policy$
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Olivier Blanchard, Raghuram G. Rajan, Kenneth S. Rogoff, and Lawrence H. Summers

Print publication date: 2016

Print ISBN-13: 9780262034623

Published to MIT Press Scholarship Online: January 2017

DOI: 10.7551/mitpress/9780262034623.001.0001

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PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 25 September 2021

The Future of Fiscal Policy

The Future of Fiscal Policy

(p.177) 18 The Future of Fiscal Policy
Progress and Confusion

Martin Feldstein

The MIT Press

The chapter argues that, relative to monetary policy, fiscal policy can stimulate investment without the financial risks associated with quantitative easing. It distinguishes between tax cuts that raise GDP and investment through Keynesian channels, and specific fiscal incentives that increase the profitability of investment, e.g., an investment tax credit. A revenue neutral package could combine an investment tax credit with a temporary increase in the corporate tax rate. The chapter concludes by arguing that fiscal incentives can be used effectively during deep and long-lasting downturns.

Keywords:   fiscal policy, investment incentives, revenue-neutral policy, policy timing, monetary policy

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