Explaining the Striking Similarity in Macroeconomic Policy Responses to the Great Recession

Abstract

This article offers an institutional explanation for the strikingly similar configuration of macroeconomic policy responses of advanced capitalist economies to the Great Recession. In recent decades, advanced economies have adopted a common structure of macroeconomic governance, which organizes macroeconomic policymaking around monetary policy operated by autonomous central banks and sets limits on politicians’ policymaking discretion. During the Great Recession, this macroeconomic governance allowed central banks to enact unconstrained monetary expansion and governments to enact constrained fiscal expansion. The argument here is empirically substantiated by focusing at how macroeconomic policies in response to the Great Recession have evolved in Australia and Sweden, as well as by looking at parallel developments in the United Kingdom and the United States.

The political economy of local government financialization and the role of policy diffusion

“…In political science, the phenomenon of financialization has received ever‐growing attention during the last decade (e.g. van der Zwan 2014; Rommerskirchen 2015; Mandelkern 2016; Witko 2016; Maxfield et al . 2017).…”

Commentary: Governance of and Through Central Banks: A Comparative Analysis at the Close of a Dismal Decade

“…This takes us to Mandelkern’s (2016, 219) explanation of the “strikingly similar configuration of macroeconomic policy responses” across advanced market economies to the 2008 crisis. The configuration refers to the mixture of unconstrained monetary expansion and constrained fiscal expansion.…”

Globalization and Austerity: Flipping Partisan Effects on Fiscal Policy During (Recent) International Crises

“…To the question if there was an alternative to deficit reduction in the UK in 2010, writing in the midst of events Hay (2010: 399) notes that “there is a clear and obvious danger that any stepping back from this be taken by the markets as an indication of the likelihood of default on sovereign debt.” Moreover, the power of finance was on display earlier on, in March 2009, when Prime Minister Brown, one of the staunchest Keynesian world leaders at the time, withdrew his plan to introduce another stimulus package. The immediate cause was “a failed gilts auction that produced reluctance and fear in the Ministry of the Exchequer regarding the government’s ability to finance additional debt” (Mandelkern, 2016: 239). In all, this suggests that the shadow of financial markets loomed large over the left-leaning British government.…”

“…A consensus appears to have emerged about the uniformity of macroeconomic policy responses and the convergence of fiscal policy reactions by left and right governments to the Global Financial Crisis (GFC) in advanced democracies. 1 Governments reacted with a two-pronged approach (Auerbach et al, 2010; Blyth, 2013; Dellepiane-Avellaneda, 2015; Hall, 2013; Mandelkern, 2016). In their initial response, they resorted to fiscal stimulus to preempt a full-blown economic collapse.…”