Imf Chief Economist Olivier Blanchard - 1323 Words

IMF chief economist Olivier Blanchard and his colleague Daniel Leigh controversially found that the multiplier was considerably larger (up to 1.7) than expected (0.5) when governments reduced public spending or increased taxes as part of austerity programs after the crisis. The simultaneous reduction of debt by governments as well as the financial sector, corporations and individuals led to a sharper contraction than expected. Similarly, expansionary fiscal policy in an environment of contracting private sector demand and reduction in debt can result in lower multipliers, as the government cannot fully offset the fall in private economic activity. As the global economy stagnated, weak countries were targeted by bond vigilantes, making it difficult to finance and forcing up their financing costs. Nations were focused to implement austerity programs, cutting spending and increasing taxes to stabilise public finances and reduce debt, trapping them in recessions or low growth, which only aggravated the problem. With the basic strategy ineffective, the focus shifted to keeping interest rates near zero and creating inflation to increase nominal GDP. If the budget could be kept in check, then debt levels would not rise and perhaps begin to fall. ... The policies, especially QE, helped stabilise conditions by lowering borrowing costs and allowing high debt levels to be managed, but did not restore growth or create sufficient inflation. The predictable failures were reminiscent ofShow MoreRelatedImf : The Imf And The Crisis Essay782 Words   |  4 PagesThe IMF and the Crisis in Greece There are many examples of IMF projects that resulted in failure in recent years. Brazil, Argentina, Turkey, Korea, and Indonesia are just a few examples, and now we can add Greece to the list. The IMF invested in Greece in 2010 and in 2013, the IMF openly recognized that they misjudged the effect austerity would have on the Greek economy (Elliot, L., Inman, P., Smith, H., 2013). They issued a report that identified Notable failures that include failure inRead MoreThe Imf And The Crisis910 Words   |  4 PagesThe IMF and the Crisis in Greece The IMF is one of a number of international organizations whose work is aimed at preventing economic crisis and rebuilding economies. According to the Levin Institute, both the IMF and the World Bank were started after WW2 in response to concerns about the stability of economic markets around the world. While the World Bank now has a focus projects and sustainable development, the IMF is primarily focused on fiscal policy with lending practices that are focused onRead MoreThe Impact Of Expansionary Monetary Policy During The Great Recession1720 Words   |  7 Pagesdeclared by the International Monetary Fund (IMF) as the worst global recession of the 20th century since the Great Depression [1]. After eight years, global economies today continue to struggle to find sustainable recovery and robust growth. The crisis was a massive institutional failure that involved the bursting of the asset bubble, the collapse of the stock market, and the moribund employment rate among others. The cr isis has since triggered economists, governments, and financial institutions toRead MoreA Lecture At The George Washington University1142 Words   |  5 Pageswith easy money when inflation reaches 1 or 0%, thus avoiding deflation. Yet, during the last two recessions in the United States, the 2% inflation rate did not prevent significant fear of deflation. Extraordinary action was required, and many economists argue that the low interest rate policy following the 2001-2002 recession contributed to the housing bubble that was inflating at that time. It is not yet known what the impact will be from the unorthodox policies taken in response to deflationRead MoreThe Effects Of Public Debt On Economic Growth1893 Words   |  8 Pagesof financial deepening, macroeconomic stability, and political environment. In response to the financial and economic crisis in 2008/09, the accumulation of public debt and its effects on economic growth have received renewed attention among many economi sts and policy makers. Conventionally, a good measure of the sustainability and accumulation of a country’s debt is to consider the debt level to the overall economic output of the country measured by the Gross Domestic Product (known as the Debt-to-GDPRead MoreEffects Of Public Debt On Economic Growth1875 Words   |  8 Pagesof financial deepening, macroeconomic stability, and political environment. In response to the financial and economic crisis of 2008/09, the accumulation of public debt and its effects on economic growth have received renewed attention among many economists and policy makers. Conventionally, a good measure of the sustainability and accumulation of a country’s debt is to consider the debt level to the overall economic output of the country measured by the Gross Domestic Product (known as the Debt-to-GDP