Fatás, Antonio, Summers, Lawrence,  (2016), “Hysteresis and fiscal policy during the Global Crisis”, VoxEu, 12 October Conventional wisdom on supply and demand suggests that demand shocks are cyclical or transitory, and that only technology shocks are responsible for trend changes. This column argues that cyclical events can have permanent effects on demand, and therefore GDP. It is time for policymakers to start considering the possibility of hysteresis seriously. Relevant Posts Ubide, Ángel, …Read More

Ubide, Ángel, (2016), “The case for an active fiscal policy”, VoxEU, 11 Οctober The pre-crisis consensus was, and remains, very strong – the business cycle would be managed by monetary policy, while fiscal policy would focus solely on debt sustainability. In a world of zero interest rates, however, fiscal policy has to contribute to supporting aggregate demand and protecting against deflationary risks. This column outlines three ways in which a well-designed expansionary …Read More

Gaspar, Vitor, Moreno Badia, Marialuz, (2016), “Big Bad Actors: A Global View of Debt”, iMF Direct, 5 October In the midst of the Great Depression, the American economist Irving Fisher warned of the dangers of excessive debt and the deflationary pressures that follow on its tail. He saw debt and deflation as the big, bad actors. Now, their close relatives—too high debt and too low inflation—are still in play, at …Read More

Graham, Carol, (2016), “GDP growth — is it “good enough” or does it distort policymaking?”, Brookings, 5 Οctober Today, standard benchmarks of progress, productivity, job quality, and democracy are being upended. Income-based measures such as gross domestic product (GDP) served us well for decades, yet when GDP counts pollutant-generating economic activity on the positive side of the balance sheet, or when it fails to measure unpaid labor activity, it falls short. …Read More