The paper studies the solvency of the Indian public sector and the eventual monetization and inflation implied by stabilization of the debt/GNP ratio without any changes in the primary deficit. The non-stationarity of the discounted public debt suggests that solvency cannot be maintained with an...

We analyse deflationary bubbles in a model where money is the only financial asset. We show that such bubbles are consistent with the household’s transversality condition if and only if the nominal money stock is falling. Our results are in sharp contrast to those in several prominent...

The paper presents a non-technical survey of some of the issues involved in the design of stabilization policy in developing countries with special emphasis on policy responses to external shocks. First, the six most important external economic parameters of developing countries are reviewed: 1)...

Market interest rates on sovereign debt issued by the 12 Eurozone national governments differ very little from each other, despite the credit ratings of these governments ranging from triple A to single A, and despite significant differences among their objective indicators of fiscal-financial...

This note comments on two central issues for fiscal policy design in the United Kingdom, highlighted in the recent ‘Code for Fiscal Stability’ proposed by the new Labour government. The first concerns the merits of the so-called ‘golden rule of public sector investment’ – the...

The paper considers the case for an internationally coordinated further fiscal stimulus during the second half of 2009. Although this makes some of the analysis period-specific, most of the issues and principles considered are timeless. For a fiscal stimulus to be both effective there must be...

There are few if any technical problems involved in reversing the unconventional monetary policies - quantitative easing, credit easing and enhanced credit support - implemented by central banks around the world as short-term nominal interest rates became constrained by the zero lower bound. The...