Immutable laws of debt dynamics

Title: Immutable laws of debt dynamics
Creator: Watts, Martin J.; Sharpe, Timothy P.
Relation: Journal of Post Keynesian Economics Vol. 36, Issue 1, p. 59-84
Publisher Link: http://dx.doi.org/10.2753/PKE0160-3477360104
Publisher: M. E. Sharpe
Resource Type: journal article
Date: 2013
Description: 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.
Subject: debt dynamics; fiscal consolidation; fiscal sustainability; sovereign economies
Identifier: http://hdl.handle.net/1959.13/1058312
Identifier: uon:16388
Identifier: ISSN:0160-3477
Language: eng
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