While officials at the International Monetary Fund (IMF) said it was too early for nations to exit their stimulus policies, opinions elsewhere are mixed on which way is the right course.

IMF Managing Director Dominique Strauss-Kahn said recently that while the global economy had clawed itself out of the worst of the economic downturn, it was still too early for a general exit from stimulus policies.

"We recommend erring on the side of caution, as exiting too early is costlier than exiting too late," he said.

But others disagree.

European Central Bank President Jean-Claude Trichet said shortly thereafter that there was a need for "exit strategies" from stimulus measures.

In the United States, there are doubts over the effectiveness of the US$787 billion stimulus package.

As many economists believed that the stimulus measure prevented the recession from spiraling out of control, others noted that unemployment reached 10.2 percent -- the highest in more than two decades -- until last week's downward shift to 10 percent.

And the underemployment rate, a measure of partially employed workers, stands much higher at 17.2 percent, dropping slightly Friday from 17.5 percent.

Analysts also harbored reservations over the cost-effectiveness of stimulus in the European Union, as the union posted a 9.8-percent unemployment rate for the month of October, the highest in nearly 11 years.

"I don't think it has worked," said Andy Busch, a Global Currency and Public Policy strategist at the BMO Capital Markets.

He added that continuing stimulus efforts as a blanket policy was unwise.

"I'm concerned that central banks around the world will keep their foot on the gas much longer than needed," he said. "That could encourage inflation down the road that will be hard to deal with."

Indeed, central banks and governments find themselves in a quandary -- withdraw too early and risk derailing the recovery or continue too long and create bubbles, other analysts said.

Busch said too much fiscal stimulus in the United States was the wrong way to go and could create problems similar to those Japan was now facing, such as sluggish growth, debt and stunted consumption.

"We should be finding ways for small to mid-sized firms to hire more people and grow," he said. And higher taxes, which will be levied when the Congress attempts to pay down ballooning deficits, will stunt the growth of smaller companies, he added.

Small businesses, firms with less than 500 employees, account for more than half of private sector employment, according to the Small Business Administration.

Still, Indian officials said stimulus measures might be responsible for the resurgence of growth there, as the economy grew last quarter at 7.9 percent.

But while the country's stimulus packages injected a total of 100 billion dollars into the monetary system, officials fret that it might be too early to expect such growth in the quarters ahead and that the economy could sputter if stimulus plans were exited too soon.

Michele Gambera, chief economist of Ibbotson Associates, said stimulus measures were effective for some countries, especially those export-dependent emerging economies.

"There is only so much growth that countries can get from exports," he said, adding that the US consumers are still guarding their wallets while the economy slogs toward recovery from the worst economic downturn in more than 50 years.

That is why stimulus-funded projects to build infrastructure in developing countries are needed, he said.

"Some countries have to invest and renovate their infrastructures," he said, adding that was especially the case in developing nations, which needed water sanitation and roads to create jobs and increase future productivity.

Still, such measures should be temporary, and countries should avoid a repeat of Japan's policies of the 1990s, when the island nation spent large sums on unneeded infrastructure in a bid to create jobs and boost economic growth.

Meanwhile, Japan's new government just approved a fresh influx of 30 billion dollars in stimulus funds.

"I'm not sure that further stimulus is needed there," Gambera said, adding that the land of the rising sun instead needed more trade liberalization.

Ben Carliner, director of research at the Economic Strategy Institute, said many IMF policies were steps in the right direction.

These include efforts to coordinate a global stimulus program, loans to emerging markets' central banks such as Mexico's, and softening the terms of those loans.

"The question isn't whether the IMF is moving in the right direction -- it is -- the question is whether it has done enough," he said.

The 787-billion-dollar stimulus package in the United States has successfully halted the financial panic and restored investor confidence, and more stimulus funds could address unemployment and economic sluggishness, he said.

Still, other analysts said fiscal stimulus packages often did not begin to take effect until countries were already on the way to recovery, as funds took time to meander their way through economies.

(Xinhua News Agency December 8, 2009)