Government spending in a recession can boost a country’s economy without permanently bloating its public debt, even if the debt is already quite large, researchers told an influential group of central bankers in Jackson, Wyoming, on Saturday.
“Expansionary fiscal policies adopted when the economy is weak may not only stimulate output but also reduce debt-to-GDP ratios,” University of California, Berkeley, professors Alan Auerbach and Yuriy Gorodnichenko said in a paper presented at the Kansas City Federal Reserve’s annual economic symposium….
The research presented Saturday offers new evidence that fiscal stimulus in a recession is not only safe but effective even in heavily indebted countries....Reuters
Fiscal stimulus in downturns is safe even when debt is high: researchers
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