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Is There an Alternative Strategy for Reducing Public Debt by 2032?

Christophe Blot (), Marion Cochard, Jerome Creel (), Bruno Ducoudré (), Danielle Schweisguth () and Xavier Timbeau ()
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Bruno Ducoudré: Observatoire français des conjonctures economiques - Centre de recherche en économie de Sciences Po, France
Danielle Schweisguth: Observatoire français des conjonctures economiques - Centre de recherche en économie de Sciences Po, France

Authors registered in the RePEc Author Service: Bruno Ducoudré

Panoeconomicus, 2014, vol. 61, issue 1, 39-57

Abstract: EMU countries have engaged in fiscal consolidation since 2011. This strategy has proven to be costly in terms of GDP. This cost has been amplified by the fact that fiscal multipliers are high in time of crisis, as recently stressed by the literature. Within this context, we wonder whether there is an alternative strategy aiming at bringing back the debt ratio to 60% of GDP in 2032, meanwhile lowering output losses. To this end, we report simulations realized from a simple model describing the Eurozone and the timing for consolidation. Based on a pragmatic view of the fiscal compact, we find an alternative path for consolidation which achieves a 60% threshold for public debt over the next 20 years in most euro area countries.

Keywords: Public debt; Growth; European macroeconomic policy (search for similar items in EconPapers)
JEL-codes: E47 E61 E62 (search for similar items in EconPapers)
Date: 2014
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