The global financial crisis has permanently lowered the path of GDP in all advanced economies. At the same time, and in response to rising government debt levels, many of these countries have been engaging in fiscal consolidations that have had a negative impact on growth rates. We empirically explore the connections between these two facts by extending to longer horizons the methodology of Blanchard and Leigh (2013) regarding fiscal policy multipliers. Using data seven years after the beginning of the crisis as well as estimates on potential output our analysis suggests that attempts to reduce debt via fiscal consolidations have very likely resulted in a higher debt to GDP ratio through their negative impact on output. Our results provide support for the possibility of self-defeating fiscal consolidations in depressed economies as developed by DeLong and Summers (2012).
Lawrence H. Summers, Antonio Fatás, Sunday, October 25, 2015 - 00:00
Bernardin Akitoby, Sanjeev Gupta, Abdelhak Senhadji, Saturday, July 18, 2015 - 00:00
There has been a heated debate about the effectiveness of fiscal policy as a countercyclical tool but little evidence on how it can support growth. This column shows that fiscal policy can lift medium- and long-term growth in both advanced and developing economies. But all fiscal reforms are not equal in their growth dividend. Successful reforms are often part of a broader reform package and can balance the growth-equity trade-off.
Joan Paredes, Javier J. Pérez, Gabriel Pérez-Quirós, Sunday, July 12, 2015 - 00:00
Uncertainty about fiscal policies can be damaging for economic performance, as it affects decisions about consumption, investment, and savings. This column argues that it is possible to reduce such uncertainty. Even if governments’ fiscal plans turn out to be (purposely) wrong ex post, they can convey useful information. It is just a matter of using the appropriate learning device whereby government promises are confronted every quarter with reality (i.e. what the government is actually doing).
Anusha Chari, Peter Blair Henry, Friday, March 6, 2015 - 00:00
Marco Buti, Nicolas Carnot, Tuesday, February 24, 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
Julio Escolano, Laura Jaramillo, Carlos Mulas-Granados, Gilbert Terrier, Friday, February 27, 2015 - 00:00
Simon Wren-Lewis, Friday, January 30, 2015 - 00:00
Paolo Manasse, Tuesday, January 27, 2015 - 00:00
Dirk Niepelt, Wednesday, January 21, 2015 - 00:00
Wouter den Haan, Tuesday, December 23, 2014 - 00:00
Paolo Manasse, Monday, December 1, 2014 - 00:00
Jean Pisani-Ferry, Friday, November 7, 2014 - 00:00
Charles A.E. Goodhart, Philipp Erfurth, Monday, November 3, 2014 - 00:00
Jagjit Chadha, Sunday, November 2, 2014 - 00:00
Hugh Rockoff, Saturday, October 4, 2014 - 00:00
Olivier Blanchard, Friday, October 3, 2014 - 00:00
Roberto Perotti, Saturday, September 13, 2014 - 00:00
Mark Hoekstra, Steve Puller, Jeremy West, Wednesday, September 3, 2014 - 00:00