The global financial crisis originated in select advanced economies with financial sectors being severely affected. The linkages between financial and fiscal situations in such significantly affected countries are the main thrust of this chapter. No doubt, several developing countries were also affected, but that was essentially through contagion. This chapter, therefore, concentrates on the relevant advanced economies and in particular, on the US and seeks to give, by way of background, a broad overview of the causes of the crisis, its global fiscal impact, responses to the crisis, and their fiscal implications (including the larger fiscal consequences on public debt). It concludes by stressing the importance of the different dimensions of imbalances, of the need for rebalancing them and, of reassessing fiscal, financial, and monetary linkages that may be necessary in distilling lessons from the crisis for the future.
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