U.S. Macro Policies and Global Economic Challenges

27 Pages Posted: 15 Jan 2021

See all articles by Joshua Aizenman

Joshua Aizenman

University of Southern California - Department of Economics; National Bureau of Economic Research (NBER)

Hiro Ito

Portland State University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 30, 2020

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

JEL Classification: F33, F34, F41, F42, F55

Suggested Citation

Aizenman, Joshua and Ito, Hiro, U.S. Macro Policies and Global Economic Challenges (December 30, 2020). East Asian Economic Review Vol. 24, No. 4 (December 2020) 469-495 , https://dx.doi.org/10.11644/KIEP.EAER.2020.24.4.388, Available at SSRN: https://ssrn.com/abstract=3766712 or http://dx.doi.org/10.2139/ssrn.3766712

Joshua Aizenman (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
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National Bureau of Economic Research (NBER) ( email )

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Hiro Ito

Portland State University - Department of Economics ( email )

Portland, OR 97207-0751
United States
503-725-3930 (Phone)
503-725-3945 (Fax)

HOME PAGE: www.econ.pdx.edu

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