3 thoughts on “Would any amount of government borrowing count as ‘enough’ for Simon Wren-Lewis?”

  1. Posted 21/04/2015 at 20:08 | Permalink

    Its a shame you do not bother to read footnotes. Footnote (2) says “If the financial crisis had permanently lowered UK GDP, or the tax potential of GDP, then that would also imply the need to reduce government spending at some point. But, as most economists agree, you do that when monetary policy can offset the impact of these cuts on demand. You do not choose to undertake austerity when short term interest rates cannot fall any further.”

  2. Posted 22/04/2015 at 08:28 | Permalink

    Ah. So when you said: “the government’s budget deficit…was particularly high in 2010 because this recession was particularly deep” what you actually meant was: “The size of the government’s deficit in 2010 was, overwhelmingly, not because GDP fell or because GDP was below potential, and was thus nothing to do with automatic stabilisers.”

    All clear now.

  3. Posted 22/04/2015 at 16:52 | Permalink

    No, what I meant was “the government’s budget deficit…was particularly high in 2010 because this recession was particularly deep”, and not because of any Labour profligacy or irresponsibility. What makes the last recession unusual (unique?) is the widespread view that it involves a permanent downward shift in productive potential. If that is true, you then have to decide when is a good time to reduce the structural deficit, and that is when the point about the lower bound for nominal interest rates comes in, which you have ignored.

Comments are closed.