Effective employment policy under tight fiscal constraints: An assessment based on the GEL model

Safeguards to limit the fallout in the financial sector and stimulus packages to prop up aggregate demand have pushed up public debt in most advanced economies, and in some emerging economies. Many countries are facing rapidly worsening sovereign debt problems, with potentially large negative spillover effects on private investment and job creation. Resolving both pre-crisis and crisis-related imbalances, however, takes time, perpetuating labour market challenges and making crisis exit more complicated. Nevertheless, the current policy space within which further action can be taken to spur job creation and place the global economy on a stable recovery path is limited – and deteriorating.