Abstract
AbstractAccording to the standard approach to the issue of public debt sustainability, fiscal austerity is the route that many countries must currently follow to reduce their debt‐to‐GDPratios back to sustainable paths. We challenge this conventional wisdom and argue that, below full employment, an increase in government spending may paradoxicallyreducethe debt‐to‐GDPratio. This claim is particularly relevant today because withCentralBank interest rates near zero there is no alternative to fiscal policy, and theonlyargument against increasing government expenditure as a way to fight unemployment is its supposed negative effect on the state of public finances.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
