Fiscal Policy Options and Responses During a Global Crisis : Lessons for the Developing Countries from the COVID-19 Pandemic

Abstract

Purpose : This paper investigated the use of fiscal instruments to stimulate economic growth during periods of unprecedented challenges posed by the COVID-19 pandemic. It assessed how developed and developing countries utilized fiscal policy measures to mitigate the pandemic’s economic impacts. Design/Methodology/Approach : Using a comparative analytical approach, this paper compared the budgetary policies of industrialized and developing countries in reaction to the COVID-19 pandemic. It investigated the efficacy of fiscal mechanisms such as stimulus packages, tax relief measures, and social safety nets in alleviating pandemic-induced economic problems. The study collected and analyzed data to determine the speed and amplitude of fiscal policy responses. Findings : The study revealed that developed countries responded swiftly and effectively to the COVID-19 pandemic with robust fiscal policies. In contrast, due to fiscal constraints and vulnerabilities, emerging market economies (EMEs) faced limitations in their responses. Developed countries’ policies prevented job losses and poverty escalation; whereas, EMEs struggled to protect vulnerable populations. Practical Implications : This paper offered crucial practical insights for policymakers in developing countries, providing recommendations for better preparedness for future crises. Policymakers in EMEs could learn from the successful fiscal policy strategies of developed nations and emphasized the importance of flexibility, rapid response, and targeted support for vulnerable groups. Strengthening fiscal resilience and establishing a robust fiscal policy framework are vital for managing unforeseen crises effectively. Originality/Value : This research contributed to the literature by presenting a comparative analysis of fiscal policy responses to the COVID-19 pandemic and highlighted disparities between developed and developing nations. It underscored the significance of adaptive fiscal measures and served as a valuable resource for policymakers aimed to build economic resilience when confronted with unprecedented challenges, such as pandemics.