Revisiting the pain in Spain

Paul De Grauwe, 7 July 2014

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The different macroeconomic adjustment dynamics in Spain – a member of a monetary union – and the UK – a stand-alone country – is stark. Paul Krugman popularised this contrast in his New York Times blog with the title “The Pain in Spain” (Krugman 2009, 2011), and commented on my own analysis in De Grauwe (2011).

Topics: Europe's nations and regions, Global crisis, Macroeconomic policy
Tags: austerity, currency depreciation, ECB, EMU, euro, EZ crisis, fiscal policy, government debt, monetary policy, monetary union, Outright Monetary Transactions, Spain, UK

The social impact of fiscal policy responses to crises

Carlos A. Vegh , Guillermo Vuletin, 12 June 2014

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Fiscal policy in many developing countries is typically procyclical. Expansionary in good times and contractionary in bad times, these policies often amplify business cycles.

Topics: Macroeconomic policy
Tags: austerity, business cycle, cyclicality, fiscal policy, LAC-7

Does austerity work? There’s no proof that it does

Markus Eberhardt interviewed by Viv Davies, 11 May 2014

The debt-growth link is essential to today's marcoeconomic policy choices. This Vox Talk discusses new evidence based on data on total public debt for 105 economies between 1972 and 2009 and two centuries of data for the UK, US, Sweden and Japan. There is no convincing proof that austerity works and that it is dangerous for policy makers to pretend otherwise.

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See Also

 

Eberhardt,  M. 2013. 'Nonlinearities in the Relationship between Debt and Growth: Evidence from Co-Summability Testing'. CFCM Working Paper 13/06

Transcript

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Topics: Macroeconomic policy
Tags: austerity, debt, GDP growth, Rogoff-Reinhart debate

Fiscal adjustment and growth: Beware of the credit constraints

Emanuele Baldacci, Sanjeev Gupta, Carlos Mulas-Granados, 31 March 2014

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In the aftermath of the recent financial crisis, the discussion of the effects of fiscal adjustment on economic growth has intensified. While some scholars have focused on the characteristics of the fiscal consolidation needed to bring public debt down from historically high levels, others have examined the effects of alternative strategies on economic performance.

Topics: Financial markets, Macroeconomic policy
Tags: austerity, credit constraints, debt, deleveraging, financial crisis, fiscal consolidation, fiscal policy

Tax evasion and austerity-plan failure

Francesco Pappadà, Yanos Zylberberg, 3 February 2014

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Austerity plans in southern European countries (Greece, Portugal, Spain, and Italy) have so far yielded mixed results (Salto 2013). On the one hand, the primary budget balances of these countries have improved, and their risk premiums are now stabilised at a much lower level than during the crisis peak.

Topics: Financial markets, Taxation
Tags: austerity, credit, European sovereign debt crisis, Greece, tax evasion, transparency, VAT

Public debt and economic growth: There is no ‘tipping point’

Markus Eberhardt, Andrea F Presbitero, 17 November 2013

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The presence of a common threshold, or ‘tipping point’ – beyond which the detrimental impact of debt on growth is significant, or significantly increases – is currently taken as given in many policy circles.

Topics: Macroeconomic policy
Tags: austerity, debt, growth

Pushing on a string: US monetary policy is less powerful during recessions

Silvana Tenreyro, Gregory Thwaites, 12 November 2013

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Most industrialised countries have been trying to cut public borrowing without impeding recovery from the Great Recession. Central banks have attempted to square this circle by loosening monetary policy.

Topics: Global crisis, Monetary policy
Tags: austerity, economic recovery, monetary and fiscal policy, US

Austerity and stupidity

Lorenzo Bini Smaghi, 6 November 2013

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 The recent Eurozone crisis has shown that austerity measures are self-defeating. They produce severe recessionary consequences which – at least in the short term – tend to increase public debt, as a ratio to GDP.

Topics: Macroeconomic policy
Tags: austerity, stupidity

How to make Europe's incipient recovery durable – A rejoinder

Marco Buti, Pier Carlo Padoan, 8 October 2013

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Our recent Vox column triggered an interesting and lively debate (see for instance Krugman, 2013; Fatas, 2013; Watt, 2013).

Topics: Macroeconomic policy
Tags: austerity, EZ recovery, Great Recession

Tax-policy procyclicality

Carlos A. Vegh , Guillermo Vuletin, 1 October 2013

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It is well-established that government spending in developing countries has often been procyclical. In other words, government spending has increased in good times and contracted in bad times, thus exacerbating the underlying business cycle. The inability to save in good times to build a war chest for bad times has often led to wrenching financial and sovereign-debt crises.

Topics: Macroeconomic policy, Taxation
Tags: austerity, business cycles, cyclicality, developing countries, fiscal policy, tax

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