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Crunch Time

Fiscal Crises and the Role of Monetary Policy


audio autogenerado
audio autogenerado

Editorial Rating

7

Qualities

  • Controversial
  • Analytical
  • Overview

Recommendation

How much government debt is too much? At what point does it cause an economy to spiral out of control? Four economists – David Greenlaw, James D. Hamilton, Peter Hooper and Frederic S. Mishkin – studied data from 20 developed nations over a 12-year period seeking to answer these difficult, dynamic questions. They explain the problem and its possible ramifications as well as the dismal science allows. Along with a math-heavy econometric analysis, the authors concisely interpret their findings for those who are statistically challenged. Though their conclusions and methodology have met with some pushback from other economists, this is an intelligent analysis of the broader situation. getAbstract recommends this report to economists, academics, financial professionals and government officials working on fiscal and monetary policy.

Take-Aways

  • Sovereign debt has grown substantially for most developed economies since 2008.
  • Some nations may face an “adverse feedback loop” of rising rates and rising debt.
  • This vicious circle starts when debt rises to a tipping point, forcing interest rates to rise sharply and substantially lowering economic output, which, in turn, adds to debt.

About the Authors

David Greenlaw is chief US fixed-income economist at Morgan Stanley. James D. Hamilton is an economics professor at the University of California at San Diego. Peter Hooper is chief economist at Deutsche Bank Securities. Frederic S. Mishkin is a banking professor at Columbia University.


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