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http://dx.doi.org/10.11644/KIEP.EAER.2020.24.4.388

U.S. Macro Policies and Global Economic Challenges  

Aizenman, Joshua (University of Southern California and NBER)
Ito, Hiro (Portland State University)
Publication Information
East Asian Economic Review / v.24, no.4, 2020 , pp. 469-495 More about this Journal
Abstract
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.
Keywords
Debt Overhang; Emerging Markets; Macro Policies; Secular Stagnation; Global Currencies; Global Stability;
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