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Fiscal consolidation : Dr Pangloss meets Mr Keynes
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Miller, Marcus and Zhang, Lei (2013) Fiscal consolidation : Dr Pangloss meets Mr Keynes. Working Paper. Coventry, UK: Department of Economics, University of Warwick. CAGE Online Working Paper Series, Volume 2013 (Number 159).
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Text (Working paper)
WRAP_159-2013_miller.pdf - Published Version Download (845Kb) | Preview |
Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
A simple dynamic framework is used to show how consolidation plans that are robust
and effective at capacity output can be undermined by demand failure. If the market
panics and interest rates rise, the process can indeed become dynamically unstable.
Tightening fiscal policy to reassure financial markets can lead to a low level
“consolidation trap”, however. Better that the Central Bank acts to keep interest rates
low; and that fiscal consolidation efforts be state contingent – allowing room for
economic stabilisation. The pro-cyclicality of fiscal policy could also be reduced if, as
Shiller has argued, debt amortization were state contingent, being indexed to GDP
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Alternative Title: | |||||
Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HJ Public Finance |
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Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Debts, Public -- European Union countries, Global Financial Crisis, 2008-2009 , Inflation (Finance) -- European Union countries, Banks and banking -- European Union countries, Keynesian economics | ||||
Series Name: | CAGE Online Working Paper Series | ||||
Publisher: | Department of Economics, University of Warwick | ||||
Place of Publication: | Coventry, UK | ||||
Official Date: | September 2013 | ||||
Dates: |
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Volume: | Volume 2013 | ||||
Number: | Number 159 | ||||
Number of Pages: | 38 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Published | ||||
Date of first compliant deposit: | 13 February 2018 | ||||
Date of first compliant Open Access: | 13 February 2018 |
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