Many OECD countries suffer from high sovereign debts. Sooner or later, this problem must be addressed. Many argue that this will require some form of fiscal retrenchment or institutional reform or a combination of the two. This column argues that the two are not complements as many suggest – they are instead substitutes.
Alberto Alesina, 12 November 2010
Many nations are in the middle of painful fiscal retrenchments. This column presents recent research on the impacts of these policies. It argues that spending cuts are less recessionary than tax increases when deficits are reduced and responds to criticisms of these findings in the recent IMF World Economic Outlook.
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