The leaders of the G20 appear to be shifting away from monetary policy as the only mechanism called on to drive economic growth, says TD Economics in a new report.
The latest G20 joint statement confirms that they are shifting from an exclusive reliance on monetary policy toward co-ordinated monetary and fiscal approaches to stoking growth. The TD report notes that the G20 agreed to utilize “monetary, fiscal, and structural policy tools” to bolster the global economy.
The G20 appears to be finally heeding calls from major international organizations, such as the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD), for added stimulus, the TD report adds.
“The prospect of more fiscal stimulus bodes well for stronger global infrastructure investment,” the TD report says, and this trend, “will be a key theme supporting our global outlook over the next few years.”
In addition to a commitment to a more balanced approach to policy, G20 leaders pledged to pursue reforms including policies that promote innovation, increase productivity, and reduce pollution, and they reiterated a commitment to global trade and investment instead of protectionism. “Moreover, they agreed to refrain from competitive devaluations and avoid targeting exchange rates for competitive purposes,” the TD report says.
“The outcome of this weekend’s G20 summit reinforces our view that global policymakers have begun to pivot away from monetary policy as the sole tool that is supporting the economic recovery after the Great Recession,” the TD report says.