How to jumpstart the Eurozone economy

Francesco Giavazzi, Guido Tabellini 21 August 2014

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The mantra is that once again it is up to the ECB to save the Eurozone. Quantitative easing is the last policy tool available to jumpstart the Eurozone economy. The longer the ECB waits before starting to buy government bonds, the further away will the recovery be. This analysis, however, overestimates the power of monetary policy.

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Topics:  Europe's nations and regions Macroeconomic policy

Tags:  ECB, monetary policy, fiscal policy, quantitative easing, public debt, aggregate demand, Eurozone economy, stagnation

Will the US inflate away its public debt?

Ricardo Reis, Jens Hilscher, Alon Raviv 07 August 2014

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Should the US Federal Reserve raise the inflation target from its current level of 2%? And will it? One benefit would be to make hitting the zero lower bound less likely, which would lead to less severe recessions, as Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro (2010), Daniel Leigh (2010), and Laurence Ball (2013) have argued on this website.

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Topics:  Macroeconomic policy

Tags:  inflation, monetary policy, public debt, seignorage

Sovereign debt markets in turbulent times: A view of the European crisis

Fernando A Broner, Aitor Erce, Alberto Martin, Jaume Ventura 23 July 2014

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Between the start of the financial crisis in 2007 and late 2009, the Eurozone’s periphery countries saw a substantial reduction in economic growth and an increase in deficits. But their economic performance was, if anything, stronger than that in the core countries. The recessions in the periphery were no deeper than in the core, and financial markets absorbed their increasing public debt as they had done in the past, with non-resident creditors absorbing large portions of the increase.

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Topics:  Europe's nations and regions Global crisis Monetary policy

Tags:  public debt, Eurozone crisis, Eurozone sovereign debt, creditor discrimination

Determinants of the growth and sovereign debt correlation

Matthijs Lof, Tuomas Malinen 25 May 2014

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Since the outbreak of the financial crisis, the relationship between debt and growth has been an issue of heated debate among both academics and policymakers. Reinhart and Rogoff (2010a) showed a negative correlation between sovereign debt and economic growth, and argued that countries could be confronted with a considerable decline in their growth potential after the debt-to-GDP ratio exceeds 90%.

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Topics:  Macroeconomic policy

Tags:  economic growth, public debt

The unpleasant legacy of the crisis: public debt and low trend growth in the Eurozone

Nicholas Crafts interviewed by Viv Davies,

Date Published

Tue, 01/21/2014

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See Also

Crafts, N (2013b), “Saving the Euro: a Pyrrhic Victory?”, CAGE-Chatham House Policy Briefing Paper No. 11.

Buiter, W and E Rahbari (2013), “Why Do Governments Default and Why Don’t They Default More Often?”, CEPR Discussion Paper 9492.

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Topics

Economic history Macroeconomic policy
Tags
ECB, eurozone, fiscal consolidation, public debt, gold standard, financial repression, debt monetisation

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The Eurozone: If only it were the 1930s Escaping liquidity traps: Lessons from the UK’s 1930s escape To end the Eurozone crisis, bury the debt forever A consistent trinity for the Eurozone Why fiscal sustainability matters
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The Eurozone: If only it were the 1930s

Nicholas Crafts 13 December 2013

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The 1930s deservedly have a bad name. It is hard to imagine that a decade that included the Great Depression and a major de-globalisation of the world economy, and culminated in WWII could be other than notorious. And yet, compared with struggling Eurozone economies today, the economic situation in Europe in the later 1930s was in many ways more promising. This is particularly true of the aftermath of public debt and the difficulty of dealing with it.

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Topics:  Economic history Macroeconomic policy

Tags:  ECB, eurozone, fiscal consolidation, public debt, gold standard, financial repression, debt monetisation

The economic crisis: How to stimulate economies without increasing public debt

Richard Wood,

Date Published

Fri, 08/31/2012

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Tags
global crisis, public debt, quantiative easing

US debt issuance since 1951 and the fallacy of issuing floating rate notes

Peter Stella, Manmohan Singh 14 May 2012

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Most of today’s debate turns on the amount of US debt issuance, but the nature of the debt is also under discussion. In the current environment of macroeconomic uncertainty, the demand for safe assets has bloomed and the definition of “safe” is evolving. Part of this is the debate on whether floating rate notes should be issued by the US Treasury. In a recent report to the Secretary of the Treasury from the Treasury Borrowing Advisory Committee (31 January 2012), reference was made to floating rate notes:

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Topics:  Macroeconomic policy

Tags:  US, public debt, Fiscal crisis, floating rate notes

A case for balanced-budget stimulus

Pontus Rendahl 26 April 2012

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With debt-levels hitting record highs and growth running low on steam, European policymakers have found themselves facing a grim dilemma: should government spending be increased at the risk of reawakening the wrath of the sovereign bond markets? Or should austerity instead assume the political mantra with the hope of merely muddling through?

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Topics:  Macroeconomic policy

Tags:  government spending, fiscal stimulus, public debt, multiplier effect

Lessons from a century of large public debt reductions and build-ups

S. M. Ali Abbas, Nazim Belhocine, Asmaa El-Ganainy, Mark Horton 18 December 2011

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Empirical work on debt cycles and debt sustainability has been constrained by lack of public debt data on a large number of countries over a long time period. Existing studies are based on datasets that either cover short time periods (such as Jaimovich and Panizza 2010) or omit a large number of countries (such as Reinhart and Rogoff 2010).

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Topics:  Global governance Macroeconomic policy

Tags:  public debt, Fiscal crisis, Eurozone crisis

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