Paul De Grauwe, Yuemei Ji, 14 October 2019

With an economic slowdown looming in the euro area, how should fiscal policies respond? This column uses a behavioural macroeconomic framework to investigate the trade-offs between stabilising output and public debt. It proposes that, when the interest rate is lower than the growth rate of the economy, fiscal policy can be used as a tool for output stabilisation while keeping public debt stable. It argues that many EU countries have the fiscal space to stimulate their economies, which could help in preventing a recession.

Jason Furman, 02 November 2016

The landscape of the fiscal policy debate has changed over the past decade, with academics and international organisations moving away from an ‘Old View’ of fiscal policy as ineffective. This column uses examples from the US and Europe to highlight the five principles of a ‘New View’ of fiscal policy, which increasingly appreciates that expansionary fiscal policy is effective in a world of persistently low interest rates, low growth, and strong international linkages.

Richard Baldwin, Daniel Gros, Stefano Micossi, Pier Carlo Padoan, Giuliano Amato, 07 December 2010

The unfolding crisis in Europe has focused policymakers’ attention on reducing debt-to-GDP ratios. This open letter to the President of the European Council argues that, while the top part of that fraction is important, the most critical factor in the long run is the restoration of GDP growth – offering several policy recommendations to this end.

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