U.S. Macro Policies and Global Economic Challenges

Joshua Aizenman and Hiro Ito

East Asian Economic Review, 2020, vol. 24, issue 4, 469-495

Abstract: This paper overviews different exit strategies for the U.S. from the debt-overhang, and analyses their implications for emerging markets and global stability. These strategies are discussed in the context of the debates about secular-stagnation versus debt-overhang, the fiscal theory of the price level, the size of fiscal multipliers, prospects for a multipolar currency system, and historical case studies. We conclude that the reallocation of U.S. fiscal efforts towards infrastructure investment aiming at boosting growth, followed by a gradual tax increase, aiming at reaching a modest primary fiscal surplus over time are akin to an upfront investment in greater long-term global stability. Such a trajectory may solidify the viability and credibility of the U.S. dollar as a global anchor, thereby stabilizing Emerging Markets economies and global growth.

Keywords: Debt Overhang; Emerging Markets; Macro Policies; Secular Stagnation; Global Currencies; Global Stability (search for similar items in EconPapers)
JEL-codes: F33 F34 F41 F42 F55 (search for similar items in EconPapers)
Date: 2020
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Working Paper: U.S. Macro Policies and Global Economic Challenges (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:0388

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