Fiscal policy debt crises and economic growth
It is very well known that growth rates play a role in debt dynamics. Despite this widespread knowledge real world narratives of public debt crises often focus almost exclusively on budget deficits and neglect the role of growth. This paper presents the simplest arithmetic possible to illustrate how...
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Banco Central de Chile
2019
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oai-20.500.12580-38262021-04-24T11:10:17Z Fiscal policy debt crises and economic growth Easterly, William, 1957- POLÍTICA FISCAL DEUDA PÚBLICA DESARROLLO ECONÓMICO It is very well known that growth rates play a role in debt dynamics. Despite this widespread knowledge real world narratives of public debt crises often focus almost exclusively on budget deficits and neglect the role of growth. This paper presents the simplest arithmetic possible to illustrate how growth slowdowns could contribute to rapid increases in public debt to GDP ratios. It shows that growth slowdowns have indeed played a role in a wide variety of well known debt crises. It then considers what would be good practice for precautionary fiscal policy focusing in particular on conservative forecasts of future growth. Unfortunately political economy incentives cause policymakers to violate such good forecast practices with a systematic tendency to excessive optimism about future growth. There even appears to be some anecdotal examples of even worse optimism biases when the debt crises are worse 2019-11-01T00:07:03Z 2019-11-01T00:07:03Z 2015 Artículo 978-956-7421-48-0 https://hdl.handle.net/20.500.12580/3826 eng Series on Central Banking Analysis and Economic Policies no. 21 Attribution-NonCommercial-NoDerivs 3.0 Chile http://creativecommons.org/licenses/by-nc-nd/3.0/cl/ .pdf Sección o Parte de un Documento p. 139-154 application/pdf Banco Central de Chile |
| institution |
Banco Mundial |
| collection |
Banco Mundial |
| language |
eng |
| topic |
POLÍTICA FISCAL DEUDA PÚBLICA DESARROLLO ECONÓMICO |
| spellingShingle |
POLÍTICA FISCAL DEUDA PÚBLICA DESARROLLO ECONÓMICO Easterly, William, 1957- Fiscal policy debt crises and economic growth |
| description |
It is very well known that growth rates play a role in debt dynamics. Despite this widespread knowledge real world narratives of public debt crises often focus almost exclusively on budget deficits and neglect the role of growth. This paper presents the simplest arithmetic possible to illustrate how growth slowdowns could contribute to rapid increases in public debt to GDP ratios. It shows that growth slowdowns have indeed played a role in a wide variety of well known debt crises. It then considers what would be good practice for precautionary fiscal policy focusing in particular on conservative forecasts of future growth. Unfortunately political economy incentives cause policymakers to violate such good forecast practices with a systematic tendency to excessive optimism about future growth. There even appears to be some anecdotal examples of even worse optimism biases when the debt crises are worse |
| format |
Artículo |
| author |
Easterly, William, 1957- |
| author_facet |
Easterly, William, 1957- |
| author_sort |
Easterly, William, 1957- |
| title |
Fiscal policy debt crises and economic growth |
| title_short |
Fiscal policy debt crises and economic growth |
| title_full |
Fiscal policy debt crises and economic growth |
| title_fullStr |
Fiscal policy debt crises and economic growth |
| title_full_unstemmed |
Fiscal policy debt crises and economic growth |
| title_sort |
fiscal policy debt crises and economic growth |
| publisher |
Banco Central de Chile |
| publishDate |
2019 |
| url |
https://hdl.handle.net/20.500.12580/3826 |
| work_keys_str_mv |
AT easterlywilliam1957 fiscalpolicydebtcrisesandeconomicgrowth |
| _version_ |
1718347035974828032 |