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Professor Jagjit Chadha: Is it time to loosen fiscal policy?

Written by Ashwin Rattan Sunday, 23 September 2012 15:44
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 Jagjit Chadha is Professor of Economics at the University of Kent.

 

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The debate on the scope for looser fiscal policy just does not go away.  
 
With every ONS release it seems, the cry for more action goes up.  
 
But, unlike the popular media, I am not terribly interested in whether Keynes or Hayek are right or what they would have done.  
 
Much to our, no doubt, great loss they are dead and so we must really work it out ourselves.   The key questions we have to ask are pretty obvious and yet is continually amazes me that the debate is so little illuminated by answers to these questions:
 
·         What is the level of public debt relative to income and is it on a sustainable path?
·         Relatedly, what is the financial market’s appetite for holding UK government debt
           - Is the demand curve perfectly elastic or rather inelastic?
·         What is the likely level of spare capacity in the economy?
 
Your empirical answers to these questions will help frame your views on whether fiscal policy should be eased...
 
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Last modified on Sunday, 23 September 2012 15:53

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