ECB paper scrutinises fiscal multipliers in high-debt countries
Governments may find themselves unable to use expansionary fiscal policy to stimulate the economy where levels of debt are very high, according to a working paper published by the European Central Bank (ECB) on February 15.
The paper, Fiscal Stimulus in Times of High Debt, by Christiane Nickel and Andreas Tudyka, uses a sample of 17 European countries from 1970–2010 to measure fiscal multipliers at different debt levels. They find that spending boosts real growth until debt reaches about 60% of
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