Introduction

In contrast to what happened during the golden age of Keynesian policies in the 1950s and 1960s, today fiscal policy has lost relevance, both in the short term as an instrument to stabilize the business cycle, with monetary policy gaining relevance, and in the long term with supply-side policies playing a predominant role. Two reasons explain the downgrading of fiscal policy. The first reason is a practical one, namely, the need to reduce the high levels of public deficit and debt, fiscal imbalances generated by the mix of increases in public spending and cuts in taxation and a tight monetary policy leading to high real interest rates. The second reason is related to the dominance of neoclassical theories, which maintain that both fiscal imbalances and the large size of public revenues and expenditures have a negative impact on economic activity and growth in the short and long term.