Dr Francesco Furlanetto

The recent financial turmoil has sparked renewed widespread interest in the effectiveness of fiscal policy as a stabilization tool. Many countries have launched ambitious fiscal packages whose New Perspectives on the Effectiveness of Fiscal Policy objective is to stimulate a weak macroeconomic environment. In policy circles, the use of fiscal policy has been justified on the basis of essentially two arguments. The first relies on the possible ineffectiveness of monetary policy in the current situation in which the interest rate is approaching the zero lower bound in several countries. When standard monetary policy is ineffective, as in a liquidity trap situation, a standard IS-LM analysis would suggest a major role for fiscal policy intervention. The second argument is based on the possible presence of a credit crunch reducing household access to credit. When financial frictions are tight, as could be the case in the current period, a fiscal stimulus can reduce credit constraints by increasing current income for credit constrained agents. In this lecture, Dr Francesco Furlanetto will present recent empirical evidence and theoretical models to understand whether these arguments find support in the academic literature.

Dr Furlanetto’s research field includes monetary economics and open economy macroeconomics. His doctorate was gained at the University of Lausanne, where he has also lectured in macroeconomics. Since 2007, Dr Furlanetto has been a senior advisor at Norway’s central bank, Norges Bank. Apart from traditional central bank responsibilities, Norges Bank manages Norway’s foreign exchange reserves and the Government Pension Fund of Norway, which is one of the world’s largest investment pools.