Comment

Abstract

This is a very interesting and relevant paper. The authors examine a mix of advanced and emerging market economies’ policy response to the Great Recession of 2007–2009. Unlike other treatments, the novelty of the approach is that it links the strength of fi scal and exchange rate responses to the extent of fi scal space and trade openness. In other words, they marry the insights of public fi nance and open economy macroeconomics. The authors fi nd, using simultaneous equations estimation, that countries rely more on the former when there is more fi scal space (in 2006) and are less open in terms of international trade. They fi nd that this pair of fi ndings is robust to a variety of modifi cations of the specifi cation and estimation approaches. I think these fi ndings make a lot of sense, and I expect them to be established as stylized facts in the literature. Nonetheless, these fi ndings inspire some additional questions, as well as avenues for further research.