Fiscal tightening is endangering global recovery says UN organisation

The Trade and Development Report 2011: Post-Crisis Policy Challenges in the World Economy, released yesterday by the United Nations Conference on Trade and Development (UNCTAD), argues that a shift from fiscal stimulus towards fiscal tightening is self-defeating, especially in the most developed economies which were severely hit by the financial crisis. In such a situation, a restrictive fiscal policy may … Continue reading

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US fiscal policy and the multiplier effect

Traditional Keynesian theory suggests that a change in government expenditure on real GDP has an effect greater than one-for-one. In other words as a government pumps money into the economy this will put unemployed resources to work which will have a one-for-one effect initially. However, as households receive additional income they will spend some of this and thus there will … Continue reading

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Put your cheque book away Prime Minister

Yesterday, Mervyn King, Governor of the Bank of England, was answering questions from MPs at a Treasury committee. Just another routine meeting you might think. However, the governor grabbed the headlines by breaking with a convention of the Bank of not discussing the public finances in the open.   He basically warned Gordon Brown against mounting another significant fiscal stimulus … Continue reading

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Outlook for public finances is “alarming”

In a news release issued this morning by the Confederation of British Industry (CBI) the organisation submitted its budget proposals to the Chancellor. The CBI warned that “the alarming state of the public finances rules out the option of a further significant fiscal stimulus.”   John Cridland, CBI Deputy-Director General said: “The public finances have been battered by the cost … Continue reading

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