Fiscal Austerity: Lessons from Recent Events in the British Isles

Source: Giuseppe Fontana and Malcolm Sawyer, Challenge, Volume 54, Number 2, March-April 2011
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From the abstract:
As economic austerity threatens to sweep Europe, the highly unrealistic expectations about the benefits of government spending cuts are not fully appreciated by the public. It is unlikely that they will result in substantial expansion; to the contrary, potentially they are extremely contractionary. The strong analysis in this piece, using the British budget proposals as a key example, starkly shows that the required changes in investment, savings, and other variables by the private sector to produce growth are utterly implausible. Slow growth, or even recession, is the likely outcome.

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