Publication

This working paper evaluates whether the measures against the global financial crisis and the subsequent recession implemented in the euro area and the US will be adequate responses. It indicates that these measures will not be sufficient by themselves to prevent a lengthy recession followed by a tepid recovery. The paper argues that to maximize the effectiveness of the stimulus plans, they should be accompanied by accommodative monetary policy. Furthermore, to accelerate and underpin a recovery in global economic activity, fiscal and monetary policies should also be supplemented by measures aimed at reestablishing banking and financial sectors that function properly.