Mainstream View

Debt consolidation and fiscal stabilization of deep recessions

The global financial crisis of 2008–09 has sent public debt on sharplyhigher trajectories. With the economic recovery gradually taking hold, thefocus is now shifting to fiscal “exit” strategies. Medium-term consolidationefforts are likely to include not only tax increases but also sizeable spendingcuts. Our paper uses a standard new Keynesian model to show that the an-ticipation…

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The Unexplained Part of Public Debt

This paper shows that budget deficits account for a relatively small fraction of debt growth and that stock-flow reconciliation, which is often considered a residual entity, is one of the key determinants of debt dynamics. After having explained the importance of the stock-flow reconciliation, the paper shows that this residual entity can be partly explained…

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