Keiichiro Kobayashi, 27 April 2009

Fiscal stimulus is a much-needed temporary painkiller, but it is not enough to put the global economy on a path to recovery. This column argues that some economists – led by Paul Krugman – invest too much hope in the effects of fiscal stimulus while turning a blind eye towards the bad-debt mess. Stringent inspections and evaluations of bank assets by financial regulators, followed by sufficient infusions of taxpayer-funded capital will be the only effective means of clearing away the oppressive uncertainty.

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CEPR Policy Research