The Challenge of Debt Reduction during Fiscal Consolidation; by Luc Eyraud and Anke Weber; IMF Working Paper 13/67; March 1, 2013


Studies suggest that fiscal multipliers are currently high in many advanced economies. One important implication is that fiscal tightening could raise the debt ratio in the short term, as fiscal gains are partly wiped out by the decline in output. Although this effect is not longlasting and debt eventually declines, it could be an issue if financial markets… (More)


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