U.S. Macro Policies and Global Economic Challenges
This paper overviews different exit strategies for the U.S. from the debt-overhang, and analyses their implications for emerging markets and global stability. These strategies are discussed in the context of the debates about secular-stagnation versus debt-overhang, the fiscal theory of the price le...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Korea Institute for International Economic Policy
2020-12-01
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| Series: | East Asian Economic Review |
| Subjects: | |
| Online Access: | https://dx.doi.org/10.11644/KIEP.EAER.2020.24.4.388 |
| Summary: | This paper overviews different exit strategies for the U.S. from the debt-overhang, and analyses their implications for emerging markets and global stability. These strategies are discussed in the context of the debates about secular-stagnation versus debt-overhang, the fiscal theory of the price level, the size of fiscal multipliers, prospects for a multipolar currency system, and historical case studies. We conclude that the reallocation of U.S. fiscal efforts towards infrastructure investment aiming at boosting growth, followed by a gradual tax increase, aiming at reaching a modest primary fiscal surplus over time are akin to an upfront investment in greater long-term global stability. Such a trajectory may solidify the viability and credibility of the U.S. dollar as a global anchor, thereby stabilizing Emerging Markets economies and global growth. |
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| ISSN: | 2508-1640 2508-1667 |