Fiscal cuts can stabilise macroeconomy: Philly Fed paper

philadelphia-fed

Fiscal retrenchment can limit the risk of macroeconomic instability when monetary policy is constrained, according to a Philadelphia Federal Reserve paper, published on Tuesday.

Giancarlo Corsetti, Keith Kuester, André Meier and Gernot Müller, the paper's authors, analyse the effects of government spending cuts on economic activity in an environment of severe fiscal strain by measuring the risk premium on government debt issued by Belgium, Greece, Ireland, Italy, Portugal and Spain. Of

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