A key issue at the G20 is coordinating exit strategies. Empirical research suggests that demand spillovers from fiscal policy are sufficiently small that uncoordinated exits from fiscal stimulus are unlikely to threaten global demand. This column argues that research is flawed as it was based on data and theory for economies near full employment – not today’s situation. G20 leaders need to address fiscal and monetary stimulus coordination exit strategies.

What’s the proper exit strategy from the crisis? This column says the key question is how to coordinate the withdrawal of fiscal stimulus and accommodative monetary policy. It recommends that Eurozone governments commit to future spending cuts so that they do not undermine the efforts of the European Central Bank.