From 2011 to 2013, fiscal policy in the Eurozone turned progressively more restrictive. This column argues that output cost of fiscal consolidation strongly depends on presence and strength of credit constraints. With credit constraints both in the household and the firm sector, fiscal consolidation would be largely responsible for the weak growth performance during 2011-2013. Postponing the fiscal consolidation to a period of unconstrained monetary policy would have avoided most of these losses.
Ansgar Rannenberg, Christian Schoder, Jan Strasky, Wednesday, November 11, 2015 - 00:00
Anusha Chari, Peter Blair Henry, Friday, March 6, 2015 - 00:00
Sebastian Gechert, Andrew Hughes Hallett, Ansgar Rannenberg, Thursday, February 26, 2015 - 00:00
Sebastian Gechert, Andrew Hughes Hallett, Ansgar Rannenberg, Wednesday, February 25, 2015 - 00:00
Lars P Feld, Christoph M Schmidt, Isabel Schnabel, Benjamin Weigert, Volker Wieland, Friday, February 20, 2015 - 00:00
Julio Escolano, Laura Jaramillo, Carlos Mulas-Granados, Gilbert Terrier, Friday, February 27, 2015 - 00:00
Simon Wren-Lewis, Friday, January 30, 2015 - 00:00
Roberto Perotti, Saturday, September 13, 2014 - 00:00
Emanuele Baldacci, Sanjeev Gupta, Carlos Mulas-Granados, Monday, March 31, 2014 - 00:00
The recent debate on the link between austerity and growth has focused on the short run. This column discusses recent research into the link between fiscal consolidation and medium-term growth under different financial conditions. If credit is not available to consumers and investors, private demand is less able to compensate for cutbacks in public demand, so large spending cuts can have a negative effect on growth. Difficult financial conditions probably explain why fiscal adjustments that worked in the 1990s have not produced similar beneficial effects on growth in recent years.
Marco Buti, Maria Demertzis, João Nogueira Martins, Sunday, March 30, 2014 - 00:00
Although progress has been made on resolving the Eurozone crisis – vulnerable countries have reduced their current-account deficits and implemented some reforms – more still needs to be done. This column argues for a ‘consistent trinity’ of policies: structural reforms within countries, more symmetric macroeconomic adjustment across countries, and a banking union for the Eurozone.
Davide Furceri, Prakash Loungani, Thursday, February 13, 2014 - 00:00
Income inequality has been growing in many economies over the past two decades, and it is currently historically high. This column adds two new contributors to the popular explanations of increased inequality. Fiscal consolidations, especially those following the recent crisis, can increase inequality, mostly by affecting the long-term unemployment. A second source that leads to a persistent increase in inequality is capital account liberalisation. Therefore, the effects of these policies on inequality should be taken into account when deciding upon policy designs.
Nicholas Crafts, Tuesday, January 21, 2014 - 00:00
Nicholas Crafts talks to Viv Davies about his recent work on the threatening issue of public debt in the Eurozone. Crafts maintains that the implicit fault line in the EZ is evident; several EZ economies face a long period of fiscal consolidation and low growth and that a different sort of central bank might be preferable. They also discuss the challenges and constraints of banking, fiscal and federal union. The interview was recorded in London on 17 January 2014.
Olivier Blanchard, Jonathan D Ostry, Atish R Ghosh, Friday, December 20, 2013 - 00:00
The world has just been through a period of unprecedented macro policy activism. More is set to come as central banks exit unconventional policies, governments fix their fiscal positions, and financial regulations are reformed. These national policies have undeniable international spillovers. This column argues that the setting is ripe for more cooperation and suggests some ways forward, even if international macro policy coordination may continue to be heard about more often than it is seen.
Nicholas Crafts, Friday, December 13, 2013 - 00:00
This column argues that the legacy of public debt resulting from the crisis in the Eurozone is a serious threat. Both the size of the problem and the options to address it make life much more difficult for policymakers than was the case in the late 1930s after the collapse of the gold standard. For some countries, a ‘subservient’ central bank might be preferable to the ECB.
Michael Keen, Wednesday, October 16, 2013 - 00:00
Fiscal consolidation, and public concern that its pain be fairly spread, is putting tax systems under considerable pressure. This column takes stock of how they have been faring, and how they could do better.
Olivier Blanchard, Daniel Leigh, Friday, May 3, 2013 - 00:00
The debate about fiscal consolidation reduces too often to shouting matches about the value of fiscal multipliers, or about the existence of a critical debt-to-GDP ratio. This does not do justice to what is a complex choice, depending on many factors. Our purpose in this article is to review the relevant factors at play and allow for a richer discussion.
John Van Reenen, Saturday, September 15, 2012 - 00:00
John Van Reenen talks to Viv Davies about fiscal consolidation during a depression. They discuss Van Reenen's recent work on quantifying the costs and benefits of delaying austerity measures until recovery is clearly established. They also discuss whether austerity has gone too far. Van Reenen presents the case for a more federal Europe. The interview was recorded at the LSE on 13 September 2012.
John Van Reenen, Friday, April 27, 2012 - 00:00
Many policymakers in Europe seem to stick to the idea that fiscal consolidation might inspire confidence and help the economy to grow. This column argues these sentiments may be understandable but are basically wrong. For countries like the UK where borrowing is relatively cheap and sovereign default unlikely, slowing down the pace of fiscal consolidation would be a rational response. The obsession over the fiscal stance is a distraction from sustainable long-run growth.
Javier Andrés, Rafael Doménech, Saturday, April 7, 2012 - 00:00
Macroeconomic developments in Europe cast doubt on fiscal-consolidation strategies. This column examines the pace of consolidation in the Spanish 2011–14 Stability Programme. It shows that if Spain were to meet the deficit targets, it would be bringing forward by seven years the zero structural-deficit target that will be mandatory as of 2020, according to the new Spanish legislation.
Marco Buti, Pier Carlo Padoan, Tuesday, March 27, 2012 - 00:00
In late 2011, the financial crisis had evolved dangerously into a vicious circle of sluggish growth, tensions in sovereign debt markets, and banking sector fragility. CEPR Policy Insight No. 61 looks at what measures are required to turn the economy around.