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In this paper we develop a simple analytical framework to analyze “good” and “bad equilibria” in public-debt and growth dynamics.
Europe is putting in place a new system of fiscal rules following the euro area sovereign debt crisis and decades of rising government to debt-to-GDP ratios. These include the so-called "six pack" to upgrade the Stability and Growth Pact to a new Treaty incorporating the "fiscal compact".
Economic downturns which have their roots in preceding credit excesses and debt overhang have tended historically to be long lasting, whether the financial sector remained healthy or not.
Despite a deep recession in 2009 and weak growth in subsequent years, Hungary’s fiscal position compares favourably with many other OECD countries.
Three main approaches can be used to assess infrastructure performance. The first employs macro econometric techniques to estimate the impact of the existing infrastructure capital stock on growth and to infer its growth maximising level.
Economic growth is projected to be strengthening from mid-2011 onwards, but will be insufficient to restore the sustainability of public finances.
Norway’s dual income tax system achieves high levels of revenue collection and income redistribution, without overly undermining economic performance and while paying attention to environmental externalities.
Hungarian debt level has steadily increased since 2001, with the debt-to-GDP ratio reaching about 84% at end-2011.
Reducing the extent of inactivity and promoting labour supply is essential to foster labour market outcomes in Hungary in the medium term.
Using an estimated DSGE model for Hungary, the paper identifies the possible non-Keynesian channels through which a fiscal consolidation may manifest as expansionary.