The cat in the tree and further observations: Rethinking macroeconomic policy
Akerlof, George. Economists did very badly in predicting the crisis. But in this column, Nobelist George Akerlof argues that the economic policies post-crisis have been close to what a sensible ‘economist-doctor’ would have ordered. The lesson for the future is that good economics and common sense have worked well. We have had trial and success. […]
Policy preferences of central bankers and the design of a monetary-policy committee
Eijffinger, Sylvester, Mahieu, Ronald & Raes, Louis. Debate about who should be on central-bank committees has resurfaced in recent years. Is it better to appoint experienced central bankers, financiers, NGO workers or civil servants? This column argues that variations in voting patterns change with career background. Evidence suggests that if central banks want a wide range of […]
Should the role of preparing budgetary projections be delegated to an independent agency?
Merola, Rossana, Pérez, Javier. Who should we trust when it comes to fiscal forecasts: governments or independent agencies? This column argues that this question is, in fact, a red herring: empirical evidence suggests that in the past, international agencies’ fiscal forecasts were partially affected by the same problems that the literature widely acknowledges for governmental forecasts. […]
Debt, Growth and the Austerity Debate
Reinhart, Carmen, Rogoff, Kenneth. IN May 2010, we published an academic paper, “Growth in a Time of Debt.” Its main finding, drawing on data from 44 countries over 200 years, was that in both rich and developing countries, high levels of government debt — specifically, gross public debt equaling 90 percent or more of the […]
Public debt and economic growth, one more time
Panizza, Ugo, Presbitero, Andrea. Are high levels of public debt harmful for economic growth? The very public Rogoff-Reinhart kerfuffle has focused on what is not true. This column reviews the evidence on what is true. It suggests that the debt-growth link is more complex than commonly thought. While there is evidence that public debt is negatively […]
Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff
Herndon, Thomas, Ash, Michael & Pollin, Robert. We replicate Reinhart and Rogoff (2010a and 2010b) and find that coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period. Our […]
What is the net of good and bad news from Brussels and Washington?
Papadia, Francesco, Daluiso, Giuseppe. Τhe short answer is: somewhat positive. The longer, but still broad-brush, answer starts from noting that two important documents have been issued in the last few days: the In-depth reviews following the so called AMR (Alert Mechanism Report) from the European Commission and the World Economic Outlook from the IMF. It […]
Augmented inflation targeting: Le roi est mort, vive le roi
Baldwin, Richard, Gros, Daniel. The Bank of Japan has now joined the club of central banks practising a new, post-Crisis form of inflation targeting. This column discusses the new goals, new tools and new challenges of ‘augmented inflation targeting’. Despite economists’ worries and the many unknowns ahead, there really is no alternative in a post-Crisis world. […]
Measuring potential output: Eye on the financial cycle
Borio, Claudio, Disyatat, Piti & Juselius, Mikael. Financial factors are known to influence output but they are generally neglected when assessing potential output – the maximum sustainable level of economic activity. This column argues for embedding financial-cycle variables into potential output estimates. Such estimates could help central banks walk the line between too much and too little […]
The Promise of Abenomics
Stiglitz, Joseph. Japanese Prime Minister Shinzo Abe’s program for his country’s economic recovery has led to a surge in domestic confidence. But to what extent can “Abenomics” claim credit? Interestingly, a closer look at Japan’s performance over the past decade suggests little reason for persistent bearish sentiment. Indeed, in terms of growth of output […]