How the fiscal chickens might come home to roost

摘要

In their recent paper, Crunch Time:Fiscal Crises and the Role of Monetary Policy (U.S. Monetary Policy Forum), David Greenlaw, James Hamilton, Peter Hooper, and Frederic Mishkin analyze the potential risks facing countries with high debt loads. In a nutshell, high debt loads reduce the maneuvering room that countries have in implementing fiscal and monetary policy when facing severe economic conditions. The authors conclude that countries with national debt above 80% of GDP and persistent current account deficits (primarily trade deficits) are "vulnerable to a rapid fiscal deterioration as a result of. ... 'tipping point dynamics.'"