The impact of alternative paths of fiscal consolidation on output and employment in the UK

Nitika Bagaria, Dawn Holland, Jonathan Portes, John Van Reenen 14 August 2012

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In 2009-2010, the UK's budget deficit was about 11% of GDP (see here); there was no dispute among economists that a credible plan for fiscal consolidation was required. The discussion turned on the timing, given the fact that short-term interest rates are effectively at zero, output is substantially below capacity, and unemployment well above most estimates of the natural rate of unemployment.

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Topics:  Global crisis Macroeconomic policy Taxation

Tags:  fiscal policy, UK, global crisis, Fiscal crisis, austerity, consolidation

How Euro economies are being choked by an accounting identity

Florence Pisani, Anton Brender, Emile Gagna 21 June 2012

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By mid-2012 it is clear that the global recovery is at risk. By increasing uncertainty, while depressing demand in an important part of the world economy, the Eurozone crisis is dangerously slowing growth in the US and emerging economies. This is particularly worrying since the US economy could easily be pushed close to the recession zone. This would be worrisome since if the US engine were to stall, it will be very difficult to restart – given the constraints weighing on both fiscal and monetary policy.

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Topics:  EU policies Macroeconomic policy

Tags:  Fiscal crisis, Eurozone crisis

The Eurozone crisis: Fiscal fragility, external imbalances, or both?

Pietro Alessandrini, Andrew Hughes Hallett, Andrea F Presbitero, Michele Fratianni 16 May 2012

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The speculative attack against Eurozone sovereign debt, reflected in the extraordinary rise in the yields of government bonds for Greece, Ireland, Italy, Portugal, and Spain (known affectionately as the GIIPS) since the start of 2010, has sparked a heated policy debate on how best to stabilise the Eurozone (see the Vox debate moderated by Corsetti 2012). Two main views have emerged:

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Topics:  EU policies

Tags:  Fiscal crisis, Eurozone crisis, balance of payments

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

Direct democracy as a safeguard to limit public spending

Patricia Funk, Christina Gathmann 10 February 2012

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The current debt crisis in Europe and North America raises the question of how to impose spending discipline on governments and politicians. A country with historically low government spending is Switzerland, which many argue is related to the high use of direct democracy. Direct democracy is also prevalent in other countries such as the United States, where more than two thirds of the population lives in a state or city with a popular initiative.

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Topics:  Europe's nations and regions Politics and economics

Tags:  democracy, Switzerland, Fiscal crisis, Eurozone crisis

Mispricing of sovereign risk and multiple equilibria in the Eurozone

Paul De Grauwe, Yuemei Ji 23 January 2012

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It is widely acknowledged that Eurozone financial markets were systematically wrong from 2001 to 2008 when they charged the same risk premium on Greek and German government bonds despite huge differences in their debt-to-GDP ratios.

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Topics:  Europe's nations and regions International finance

Tags:  government bonds, Fiscal crisis, Eurozone crisis

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

Can austerity be self-defeating?

Daniel Gros 29 November 2011

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Could ‘austerity’ be self-defeating? Could a reduction in government expenditure lead to such a strong fall in activity that fiscal performance indicators actually get worse?

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Topics:  Europe's nations and regions Macroeconomic policy

Tags:  UK, Fiscal crisis, Eurozone crisis, austerity

Chipping away at public debt – Sources of failure and keys to success in fiscal adjustment

Anna Ivanova, Paolo Mauro, Edouard Martin 09 November 2011

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The global financial crisis has caused government debt to soar in the advanced economies. Public concern is rising and debates rage on how to fix the problem.

  • In advanced economies, the average debt-to-GDP ratio is approaching 100% – higher than at any time since World War II, and set to increase further.
  • The required fiscal adjustment is historically unprecedented.

It will take many years of chipping away at public debt to bring it back to more prudent levels.

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Topics:  International finance Politics and economics

Tags:  public debt, Fiscal crisis

Public debt in the Eurozone, Japan, and the US

Charles Wyplosz 16 September 2011

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There is little doubt that public debts have become outsized in many developed countries. Worse, they are expected to keep growing over the next decades as populations age. The financial markets have now set their eyes on this situation, making it difficult or expensive to borrow for a number of Eurozone countries, and the list could grow and expand beyond the Eurozone.

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Topics:  Global economy Macroeconomic policy

Tags:  US, EU, Japan, debt, Fiscal crisis, Eurozone crisis

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