Immutable laws of debt dynamics

In the aftermath of the global financial crisis (GFC), the ostensible focus of medium-term macroeconomic policy in most advanced sovereign and nonsovereign countries has been the pursuit of fiscal sustainability through fiscal consolidation, which is often justified by reference to the algebra of de...

Full description

Saved in:
Bibliographic Details
Published in:Journal of post Keynesian economics 2013-10, Vol.36 (1), p.59-84
Main Authors: Watts, Martin J., Sharpe, Timothy P.
Format: Article
Language:English
Subjects:
debt dynamics
Debt management
Economic crisis
Economic planning
Economic policy
Financial crisis
fiscal consolidation
fiscal sustainability
Global economy
Macroeconomic policy
Macroeconomics
Post-Keynesianism
Sovereign debt
sovereign economies
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:In the aftermath of the global financial crisis (GFC), the ostensible focus of medium-term macroeconomic policy in most advanced sovereign and nonsovereign countries has been the pursuit of fiscal sustainability through fiscal consolidation, which is often justified by reference to the algebra of debt and deficit dynamics (Blanchard et al., 1990; Buiter, 2010a; Escalano, 2010; Ley, 2010). On the other hand, modern monetary theorists, including Fullwiler (2006), reject the necessity of fiscal austerity in sovereign economies. In this paper, we revisit the algebra underpinning debt and deficit dynamics and critically assess the arguments for the imposition of austerity measures across all advanced economies that have experienced increases in deficit and debt ratios, since the advent of the GFC.
ISSN:0160-3477
1557-7821
DOI:10.2753/PKE0160-3477360104