A timely and incisive look at austerity measures that succeed—and those that don’t. Fiscal austerity is hugely controversial. Opponents argue that it can trigger downward growth spirals and become self-defeating. Supporters argue that budget deficits have to be tackled aggressively at all times and at all costs. In this masterful book, three of today’s leading experts –...
Regulatory bank levies set incentives for banks to reduce leverage. At the same time, corporate income taxation makes funding through debt more attractive. In this paper, we explore how regulatory levies affect bank capital structure, depending on corporate income taxation. Based on bank balance sheet data from 2006 to 2014 for a panel of EU-banks, our analysis yields three main results: The introduction ...
Opinions regarding capital account openness have been undergoing changes. On the one hand, financial liberalization and integration are viewed as sources of economic growth and prosperity due to a better allocation of capital to productive uses. In addition, free capital mobility and access to foreign capital are considered to be important facilitators of investment as well as cross-border risk sharing. ...
This study investigates the interrelation between the household leverage cycle, collateral constraints, and monetary policy. Using data on the U.S. economy, we find that a contractionary monetary policy shock leads to a large and significant fall in economic activity during periods of household deleveraging. In contrast, monetary policy shocks only have insignificant effects during a household leveraging ...
Using panel data of 17 OECD countries for 1980–2011, we find that the distributional consequences of fiscal consolidations depend significantly on the level of private indebtedness. Austerity leads to a strong and persistent increase in income inequality during periods of private debt overhang. In contrast, there are no discernible distributional effects when private debt is low. This result is robust ...
We estimate the effect of government spending shocks on the U.S. economy with a time‐varying parameter vector autoregression. The recent Great Recession period appears to be characterized by uniquely large impulse responses of output to fiscal shocks. Moreover, the particularity of this period is underlined by highly unusual responses of several other variables. The pattern of fiscal shock responses ...
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