debating progressive politics in Europe and beyond
I was recently rather negative about the way the IMF frames the fiscal policy debate around the right speed of consolidation. In my view this always prioritises long run debt control over fiscal stimulus at the zero lower bound (ZLB), and so starts us off on the wrong foot when thinking about the current conjuncture. [...]
It’s surprising how the language of growth diagnostics and binding constraints springs up in all kinds of unexpected places. The latest example is the IMF’s new report on jobs and growth. The IMF’s analysts say all the usual things about the primacy of macroeconomic stability and fiscal sustainability – no surprise there. But then we get a [...]
It was in the IMF’s October 2012 World Economic Outlook (WEO), in Box 1.1 with the title “Are We Understanding Short-Term Fiscal Multipliers” that Olivier Blanchard and Daniel Leigh presented for the first time the findings of their study into the impact of fiscal consolidation on economic activity. Using data from 28 different economies – [...]
I like teaching Ricardian Equivalence. Ricardian Equivalence is the idea that consumers will respond to a tax cut by saving the full amount, and not spending any of it. (Here we are concerned only with the impact of the tax cut on income, and we ignore any incentive effects.) It is counterintuitive, so it makes [...]
After two years of muddling through, the Eurozone has taken some decisive steps in order to prevent the sovereign debt crisis from leading towards the collapse of the Eurozone. Measures have ranged from a slow path towards a banking union aimed at breaking up the feedback loop between banks and sovereigns, to the Outright Monetary [...]
It was Friday September 2nd, 2011 when the troika of Greece’s creditors left Athens after two weeks of negotiations that failed to bridge the gap between the Greek government and the representatives of the IMF, the European Central Bank and the European Commission. Their last unscheduled departure was in June 2011 when Papandreou’s government went [...]
The World Economic Forum’s annual meeting in Davos has lost some of its pre-crisis panache. After all, before the meltdown in 2008, the captains of finance and industry could trumpet the virtues of globalization, technology, and financial liberalization, which supposedly heralded a new era of relentless growth. The benefits would be shared by all, if [...]
At year end we all assess the past and guess the future. We compare what we expected and what happened. We develop new expectations for the new year. In economic affairs this is particularly important, as expectations on growth are crucial for firms’ investment decisions, for government policies and for people’s chances to work. This [...]
The IMF’s mea culpa about its wrong assessment of the effects of fiscal austerity in European crisis countries is nice. However, did the IMF really have a new insight? No, not at all. Indeed, already ten years ago, in 2003, the IMF’s Independent Evaluation Office (IEO) published a thorough study about the effects of the [...]
This is significant (and thanks to Gustav Horn for sharing this on Facebook)! On Social Europe Journal we have been analysing the failure of austerity from all kinds of angles for years. And towards the end of 2012, some of the traditionally austerity supporting institutions seemed to get doubts and reviewed their approach. And guess [...]
“Why did no one see the crisis coming?” Queen Elizabeth II asked economists during a visit to the London School of Economics at the end of 2008. Four years later, the repeated failure of economic forecasters to predict the depth and duration of the slump would have elicited a similar question from the queen: Why [...]
It’s official. The International Monetary Fund has put its stamp of approval on capital controls, thereby legitimizing the use of taxes and other restrictions on cross-border financial flows. Not long ago, the IMF pushed hard for countries – rich or poor – to open up to foreign finance. Now it has acknowledged the reality that financial globalization [...]
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