Taxing, spending, and inequality – what is to be done?

Benedict Clements, David Coady, Ruud de Mooij, Sanjeev Gupta, 15 April 2014

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The causes and consequences of rising inequality have attracted considerable attention, including the recent study by Thomas Piketty (2014). This has also touched off a lively debate on the appropriate policy response to rising disparities in income and wealth (Mankiw 2013, Berg, Ostry, and Tsangarides 2014).

Topics: Poverty and income inequality, Taxation
Tags: fiscal policy, income inequality, redistribution

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

Delivering the Eurozone ‘Consistent Trinity’

Marco Buti, Maria Demertzis, João Nogueira Martins, 30 March 2014

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As argued in an earlier commentary, the financial crisis exposed important economic inconsistencies in the way that EMU operated.1 Although progress has been made, the reality is that more needs to be done.

Topics: Europe's nations and regions, Macroeconomic policy
Tags: banking union, debt, EMU, euro, eurozone, Eurozone crisis, fiscal consolidation, fiscal policy, imbalances, internal devaluation, Stability and Growth Pact, structural reforms

A fiscal shock absorber for the Eurozone? Lessons from the economics of insurance

Daniel Gros, 19 March 2014

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Even before the euro crisis started, it had been widely argued that the Eurozone needed a mechanism to help countries overcome idiosyncratic shocks. The experience of the crisis itself seemed to make this case overwhelming, and throughout the EU institutions it is now taken for granted that the Eurozone needs a system of fiscal shock absorbers.

Topics: EU institutions, Macroeconomic policy, Welfare state and social Europe
Tags: euro, eurozone, Eurozone crisis, fiscal policy, fiscal shock absorbers, fiscal shocks, fiscal union, insurance

Why fiscal sustainability matters

Willem Buiter, 10 January 2014

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Does fiscal sustainability matter only when there is a fiscal house on fire, as was the case with the Greek sovereign insolvency in 2011–12? Far from it.

Topics: Financial markets, Global crisis, International finance, Macroeconomic policy
Tags: balance-sheet recession, banking, banking union, banks, capital flows, credit booms, Currency wars, emerging markets, eurozone, Eurozone crisis, financial crisis, fiscal policy, fiscal sustainability, global financial crisis, sovereign debt, sovereign debt restructuring

Catenarian fiscal discipline

Hans Gersbach, 4 January 2014

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Limiting the accumulation of public debt in democracies has always been a problem, but it has become a particularly pressing one in the last few decades.

Topics: Macroeconomic policy
Tags: debt, democracy, fiscal discipline, fiscal policy, time inconsistency

Tax policy in (and for) hard times

Michael Keen, 16 October 2013

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Tax policy, like everything else, has been through tough times since the onset of the crisis. First, tax policy was to stimulate the economy (Heady 2011). Now it is to help consolidate the fiscal position – always with considerable urgency and all in the midst of public anger and disquiet.

Topics: Macroeconomic policy, Taxation
Tags: fiscal consolidation, fiscal policy, global crisis, Inequality, taxation, wealth

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

When is the time for austerity?

Alan Taylor, 20 July 2013

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In 1809, on a battlefield in Portugal, the first recognisable medical trial evaluated bloodletting on a sample of 366 soldiers allocated into treatment and control groups. The cure was shown to be bogus. It was the beginning of the end of pre-modern medicine.

Topics: Macroeconomic policy
Tags: austerity, fiscal policy, UK

Spillovers: Why macro-fiscal policy should be coordinated in economic unions

Gerald A. Carlino, Robert P Inman, 24 June 2013

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The recent Great Recession in the US and Europe has generated renewed interest in the management of macro-stabilisation fiscal policy in economic unions. The received wisdom among economists is that such fiscal policies can only be managed efficiently by an overarching central government. Oates, in his classic treatise on fiscal federalism, concludes:

Topics: Europe's nations and regions, Macroeconomic policy
Tags: Eurozone crisis, fiscal policy

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