Articles by Alok Sheel

Tracing the rise of Keynesian policies in the post-second world war years to its decline in the 1970s and 1980s with monetary policy playing a central role in macroeconomic stabilisation, this article examines its resurrection in the years following the global financial and economic crisis of 2007-08. It points out that at the heart of the present stimulus-austerity debate is the effectiveness of Keynesian stimulus policies during episodes of growth falling below potential, and classifi es growth crises into three different types for analytical clarity. Analysis shows that though the growth crisis in advanced economies has spilled over into developing ones through trade and investment channels, its nature is different. The focus in these countries should therefore be on addressing supply shocks and structural reforms, including investment in infrastructure, through a change in the fi scal mix.

The International Monetary Fund has made an assessment that an additional global fi rewall of $1.1 trillion is required to address the fallout of the eurozone crisis. But a number of very valid reasons make it clear that the European Central Bank or some other quasi-fi scal mechanism, rather than the IMF must be empowered by the eurozone authorities to provide the liquidity required. The IMF's resources should be used primarily for developing countries that lose market access to reserve currencies and need to square their international payments.