Fiscal Stimulus Plans: The Need for a Global New Deal

Abstract

The article reviews announced fiscal stimulus packages in 43 countries. In March 2009, the total announced for stimulus plans is US$ 2.18 trillion, or 3.5% of world's GDP, mostly in higher income economies. The majority of these recovery packages contain measures to stimulate firms, consumers, and public investment in infrastructure. The article argues that a country approach is inadequate: a global crisis requires global responses. Developing countries will be hit hard, there is a need for increased ODA, so they are able to engage in countercyclical stimulation. Reviewing the content of stimulus packages, it is argued that stimulating global demand (and reducing poverty) will require further redistributive measures. Responses have been slow. There is an urgent need for a coordinated expansionary global stimulus package.

Keywords: crisis, fiscal stimulus plans, recovery packages, poverty reduction

JEL Classification: F02, F35, H40, H53, I30, O10, O20