U.S. Macro Policies and Global Economic Challenges

Joshua Aizenman and Hiro Ito

No 28232, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F33 F34 F41 F55 (search for similar items in EconPapers)
Date: 2020-12
Note: IFM
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Published as Joshua Aizenman & Hiro Ito, 2020. "U.S. Macro Policies and Global Economic Challenges," East Asian Economic Review, vol 24(4), pages 469-495.

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