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Tuesday, June 02, 2015

'Stop Obsessing Over Debt and Watch Growth Flourish, IMF Economists Argue'

From those radicals at the IMF:

Stop Obsessing Over Debt and Watch Growth Flourish, IMF Economists Argue: ...Rather than being obsessed by debt, some countries should spur growth by not paying down their debt, argue top economists from the IMF, the institution largely tasked with helping countries cut their debt burdens. ...
Jonathan Ostry, deputy director of the IMF’s Research Department, and two other economists in his division, Atish Ghosh and Raphael Espinoza. ... say that many policy makers—here’s looking in particular at you, Berlin—have a “debt obsession” and aren’t fully factoring in the cost of insuring against future crises by paying down the debt.
“Advocates of ‘fixing the debt problem’ stress the crisis-insurance benefit, without mentioning the upfront cost of insurance,” Mr. Ostry said. “Insurance can be expensive in terms of the higher taxation needed to run a budget surplus.” ...
They aren’t arguing for all countries to halt their plans to cut debt. Rather, they contend that some countries have room in their budgets to spend more to stimulate growth without raising borrowing costs and fueling investors’ concerns. ... “For countries that have fiscal space, the cost of insurance is likely to be much larger than the benefit,” Mr. Ostry said. ...

    Posted by on Tuesday, June 2, 2015 at 08:10 AM in Economics, Fiscal Policy | Permalink  Comments (4)


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