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 […]
Comparing Unemployment During the Great Depression and the Great Recession
Black, William Βarry Eichengreen’s and Tim Hatton’s January 1988 paper entitled “Interwar Unemployment in International Perspective” is a useful starting point for any effort to compare unemployment during the Great Depression and the Great Recession. It is useful to begin by recognizing three related cautions that the authors make in that paper. First, the modern […]
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 […]
Budget balance, structural unemployment and fiscal adjustments: The Spanish case
Andrés, Javier, Doménech, Rafael. Fiscal adjustment and structural reform are key parts of Eurozone bailout packages (or key features of government policy that aims to avoid such bailouts). This column argues that patience is the most prized virtue of policymakers implementing fiscal adjustment and structural reform. Reducing unemployment and fiscal consolidation are mutually reinforcing, but they […]
Fiscal consolidation and implications of social spending for long-term fiscal sustainability
Merola, Rossana, Sutherland, Douglas. During the economic and financial crisis, fiscal positions across OECD countries deteriorated sharply. This column agues that population ageing and trends in social spending will further challenge the sustainability of fiscal balances. Research suggests that the scale of fiscal consolidation that will be needed to ensure long-term sustainability is large, but policymakers […]
Labor Market Policies and IMF Advice in Advanced Economies during the Great Recession
Blanchard, Olivier, Jaumotte, Florence & Loungani, Prakash. Τhis paper does two things. First, it articulates what are the main implications of theoretical and empirical research for design of labor market policies and labor market institutions. Second, in this light, the paper analyzes the IMF’s labor market recommendations since the beginning of the crisis, both in […]
A Modern History of Fiscal Prudence and Profligacy
Mauro, Paolo, Romeu, Rafael, Binder, Ariel & Zaman, Asad. We draw on a newly collected historical dataset of fiscal variables for a large panel of countries—to our knowledge, the most comprehensive database currently available—to gauge the degree of fiscal prudence or profligacy for each country over the past several decades. Specifically, our dataset consists of […]
Is external adjustment working in the euro area?
Wolff, Guntram. In the sixth year of the crisis of the euro area, it is time to review whether adjustment to external imbalances in the euro area is working. Current accounts have dramatically adjusted in a number of countries of the euro area as the graph below shows. The one country showing virtually no adjustment […]
Sweden – a false icon for Thatcherites
Skidelsky, Robert. It is ironic that social democratic Sweden has become a Thatcherite icon. They say that cuts in public spending were the main cause of Sweden’s economic recovery from the slump of 1992-3. Most experts think that the 30% devaluation of the krona was rather more important . Πηγή: Project Syndicate πλήρες κείμενο
Spending, income, and debt responses to minimum-wage hikes
Aaronson, Daniel, French, Eric. How are spending, income and debt affected by minimum-wage hikes? This column argues that putting money into the hands of consumers, especially low-income consumers, ultimately leads to predictable increases in spending. Evidence suggests that a $1 wage hike increases household spending by minimum-wage workers – usually in the form of collateralised debt […]