A tale of two depressions redux
Eichengreen, Barry, O’Rourke, Kevin. The debate over stimulus versus austerity continues unabated. This column shows that, while industrial production and trade recovered much more quickly than during the Great Depression, both series now appear to be slowing down. It suggests that, as St Augustine would have said had he been managing director of the IMF, there […]
Modern Monetary Theory, an unconventional take on economic strategy
Matthews, Dylan. About 11 years ago, James K. “Jamie” Galbraith recalls, hundreds of his fellow economists laughed at him. To his face. In the White House. It was April 2000, and Galbraith had been invited by President Bill Clinton to speak on a panel about the budget surplus. Galbraith was a logical choice. A public […]
Sovereign Risk, Fiscal Policy, and Macroeconomic Stability
Corsetti, Giancarlo, Kuester, Keith, Meier, André, Mueller, Gernot. This paper analyzes the impact of strained government finances on macroeconomic stability and the transmission of fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a “sovereign risk channel” through which sovereign default risk raises funding costs in the private sector. […]
Money and Morals
Krugman, Paul. Lately inequality has re-entered the national conversation. Occupy Wall Street gave the issue visibility, while the Congressional Budget Office supplied hard data on the widening income gap. And the myth of a classless society has been exposed: Among rich countries, America stands out as the place where economic and social status is most […]
Europe’s new fiscal compact treaty does not outlaw Keynesianism and is a stepping stone to more progress
Kirkegaard, Jacob Funk. Europe’s new fiscal compact is seen by some as the death of Keynesian government spending. This column argues that such analysis is simply wrong. It says that there is still room for government spending in extreme situations, but that there are now more safeguards to maintain stability, reduce contagion, and placate German […]
Seven things I learned about transition from communism
Shleifer, Andrei. Twenty years ago, communist countries began their shift towards capitalism. What do we know now that we didn’t know then? Πηγή: Voxeu πλήρες κείμενο
Fiscal Adjustment: Too Much of a Good Thing?
Cottarelli, Carlo. The IMF has argued for some time that the very high public debt ratios in many advanced economies should be brought down to safer levels through a gradual and steady process. Doing either too little or too much both involve risks: not enough fiscal adjustment could lead to a loss of market confidence […]
Understanding past and future financial crises
Gourinchas, Pierre-Olivier, Obstfeld, Maurice What explains the different effects of the crisis around the world? This column compares the 2007–09 crisis to earlier episodes of banking, currency, and sovereign debt distress and identifies domestic-credit booms and real currency appreciation as the most significant predictors of future crises, in both advanced and emerging economies. It argues […]
Foreign banks and the global financial crisis: Investment and lending behaviour
Claessens, Stijn, Van Horen, Neeltje. How did foreign banks adjust their investment and lending decisions during the global financial crisis? This column uses a new and comprehensive database to show that the crisis dramatically halted foreign direct investment in banking and that foreign banks often cut back on lending more than their domestic competitors. While exits […]
A Crisis in Two Narratives
Rajan, Raghuram. With the world’s industrial democracies in crisis, two competing narratives of its sources – and appropriate remedies – are emerging. The first, better-known diagnosis is that demand has collapsed because of high debt accumulated prior to the crisis. Households (and countries) that were most prone to spend cannot borrow any more. To revive […]