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In RealTime posts, PIIE senior staff and colleagues discuss the fast-moving economic news, financial developments, and public policy choices confronting the United States and the world.
Last week, Tyler Cowen of the blog Marginal Revolution asked “Have we seen self-defeating austerity in the United States?” Cowen declines to take a clear stand on the question, but his main point is that the well-known fiscal cuts of 2012 and 2013 have, in fact, reduced the US budget deficit. Ergo, goes the implication, [...]
For years, observers of the European Central Bank (ECB) have been hearing the same line from its former President, Jean Claude Trichet: “We have one needle in our compass, and that is price stability.” This precept should contribute to understanding the central bank’s policy stance: When price stability is assured, there is no need to [...]
European short-term economic growth prospects remain weak because of rampant fiscal consolidation, private sector deleveraging, and the temporary unsettling effects of structural reforms. But European leaders continue to take important and constructive decisions on bailouts and the banking union, suggesting that recovery will eventually get on track. At least three such decisions occurred at the [...]
The review [pdf] of the United Kingdom’s monetary policy framework published alongside the budget on March 20 reveals that the UK Treasury has ruled out replacing inflation targeting with nominal GDP targeting. That is a shame. Nominal GDP targeting would provide more space for the Bank of England to support the recovery in the near [...]
The latest policy debate on the euro area debt crisis concerns whether austerity has gone too far too soon, causing excessive recessions in some countries and making them less creditworthy rather than more so. The International Monetary Fund (IMF) has found that it had been underestimating the multiplier and therefore overstating projected output paths of [...]
The decision in Europe to tax depositors in Cypriot banks, forcing them to share in the cost of the latest euro area bailout, has sparked anger in Cyprus and concern that a run on Cypriot banks could spread to Spain, Italy, and other troubled countries. But the so-called “stability levy” on all depositors, not even [...]
Algirdas Semeta, EU Commissioner for Taxation, recently toured Washington touting the decision by eleven of the 17 members of the euro area to adopt a common financial transactions tax (FTT). In his public remarks, Commissioner Semeta invoked the name of Nobel-prize-winning, Yale economist James Tobin, who advocated such a tax in the 1970s to discourage [...]
Note: Natalia Aivazova has kindly provided me with excellent research assistance. Western democracies are commonly believed to be unable to cut public expenditures substantially. This would imply that they are not capable of resolving financial crises that erupt from time to time. Fortunately, this assumption is not correct, as is evident from the Eurostat financial [...]
Note: Natalia Aivazova has provided me with valuable research assistance, elaborating on all the statistics. In early 2009, the International Monetary Fund (IMF) and the European Bank of Reconstruction and Development (EBRD) raised a cry of despair. They feared that several of the 15 Western European banks that dominated the banking system of Central and [...]
Given the scale of India’s slowing rate of growth and other economic difficulties, there was one and only metric by which the new budget presented on February 28 would and should be assessed. Had this United Progressive Alliance (UPA) government fundamentally repudiated fiscal populism because it believed that such populism was no longer electorally popular? [...]