Alongside an emphasis on monetary policy, rather than fiscal policy, has gone the
development of what now may be termed a 'new consensus' in macroeconomics and
monetary policy. In this chapter we elaborate on the nature of this 'new consensus'. In
Chapter 3 we illustrate it by reference to the macroeconometric model of the Bank of
England. In subsequent chapters we will examine the implications of this 'new consensus'
for both monetary and fiscal policy. A possible, and important, policy implication of the 'new …

The main points downgrading fiscal policy are related to the crowding out argument and the
Ricardian equivalence theorem (see chapter 8). Arestis and Sawyer point out that, under
the" new consensus," fiscal policy should not be used to" fin~-tune" the economy, should not
aim at full employment, and should mostly operate as an" automatic stabilizer" and imply
balanced budgets over the cycle.