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After having their much touted paper which was alleged to show that high ratios of debt to GDP cause negative growth dismantled a trio of University of Mass. graduate students, Harvard economist Carmen Reinhart and Kenneth Rogoff back further away from their now discredited work.
Writing in an OP in the Financial Times;
To be clear, no one should be arguing to stabilise debt, much less bring it down, until growth is more solidly entrenched....
Nevertheless, given current debt levels, enhanced stimulus should only be taken selectively and with due caution. A higher borrowing trajectory is warranted, given weak demand and low interest rates, where governments can identify high-return infrastructure projects. Borrowing to finance productive infrastructure raises long-run potential growth, ultimately pulling debt ratios lower. We have argued this consistently since the outset of the crisis.
After having their much touted paper which was alleged to show that high ratios of debt to GDP cause negative growth dismantled a trio of University of Mass. graduate students, Harvard economist Carmen Reinhart and Kenneth Rogoff back further away from their now discredited work.
Writing in an OP in the Financial Times;
To be clear, no one should be arguing to stabilise debt, much less bring it down, until growth is more solidly entrenched....
Nevertheless, given current debt levels, enhanced stimulus should only be taken selectively and with due caution. A higher borrowing trajectory is warranted, given weak demand and low interest rates, where governments can identify high-return infrastructure projects. Borrowing to finance productive infrastructure raises long-run potential growth, ultimately pulling debt ratios lower. We have argued this consistently since the outset of the crisis.
Keynesianism is on the right track, but they are wrong when it comes to stimulus. Stimulus need not me entirely on the federal budget, especially in the world of credit default swaps and credit rating agencies. What about credit stimulus? That was done during FDR's time, it worked then. Why wouldn't it work now?
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