The Organizational Foundations of the IMF's Doctrinal Turn on Fiscal Policy after the Great Recession

Fiscal policy during the Great Recession, however, falls short of a paradigmatic shift. The Fund did not experience the kind of generational change it experienced during the 1980s when postwar neo-Keynesians retired and made room for a generation of economists who had been shaped by the New Classical revolution of the 1970s. In 2010, the year of the turn to austerity in Europe, a more qualified endorsement of fiscal stimulus is apparent. An older emphasis on maintaining states’ credibility with financial markets remained the primary goal of policy but this goal now had to cohabit with greater acceptance of discretionary fiscal stimulus programs and an emphasis on gradual fiscal consolidation where fiscal space for stimulus was limited. Changes at the managing and department director levels, the hiring of many new economists, and the strategy to wrap their tinkering activities in the cocoon of generally accepted macroeconomic models facilitated the Fund’s intriguing doctrinal evolution.