The Boom Not the Slump: The Right Time for Austerity

By Roosevelt Institute |

Download the paper (PDF) by Arjun Jayadev and Mike Konczal

Recently, the National Bureau of Economic Research put out a paper written by Alberto F. Alesina and Silvia Ardagna, which critically analyzes the Reinhart and Rogoff arguments about debt-to-GDP ratios and growth. Unconvinced of Alesina and Ardanga’s findings, Roosevelt Institute Fellows Arjun Jayadev and Mike Konczal have written a paper conveying their perspective.

Key findings: Countries historically do not cut their deficits in a slump, but instead address these problems during a non-recessionary time. When countries do cut in a slump, that action often results in lower growth and/or higher debt-to-GDP ratios. In very few circumstances are countries able to successfully cut during a slump; this happens only when either interest rates and/or the exchange rates fall sharply.

Read “The Boom Not the Slump: The Right Time for Austerity,” by Roosevelt Institute Fellows Arjun Jayadev and Mike Konczal.

 

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