The slippery fiscal space

English translation of speech in Spanish by Mr Jaime Caruana, General Manager of the BIS, at a conference hosted by the BIS Representative Office for the Americas, Mexico City, 30 November 2016.

BIS speech  | 
16 December 2016

There have been recent calls for expansionary fiscal policy to boost economic growth, but some caution is required. In particular, policymakers must interpret existing measures of fiscal space with care as these estimates are highly uncertain and fiscal space can suddenly be reduced by shifts in market sentiment. Private debt can also interact with public debt in a way that could further reduce fiscal space. In this setting, fiscal policy - and accompanying structural reforms - could be designed to increase productivity and growth over the medium and long term.