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Olivier Blanchard

What Olivier Blanchard thinks about fiscal policy

@olivier-blanchard · 24 positions · 1 change of mind

Economist; former chief economist of the International Monetary Fund.

Everything they publish, on ppll ↗

Olivier Blanchard did not write this page.

We collected these quotes from things they published elsewhere, and every quote links to where it was said. They have no account here and have not endorsed this site. Quotes are word for word; the short line under each one is our own restatement, not their wording. Their own site. Is this you? Claim it or ask us to remove it. Or tell us what is wrong here.

7 dated positions, 2022, in their own words. Our reading of what Olivier Blanchard has said — not written or endorsed by them.

  1. Our readingThe main obstacle to sound fiscal policy debate is a widespread, quasi-religious belief that public debt is inherently bad.

    Their wordsThe main challenge in discussing fiscal policy is the widely held and nearly religious belief that public debt is very bad.

    ↗Fiscal Policy under Low Interest Ratesdirect.mit.edu 1st of 22 in this piece

    public debtreligion

  3. Our readingThe probability of a self-fulfilling bad equilibrium in sovereign debt markets depends little on the debt level itself, but is much reduced by a rule linking the primary balance to debt service increases.

    Their wordsI have argued that the probability of a bad equilibrium is only marginally influenced by the level of debt, but can be much reduced by a contingent rule making the primary balance react to an increase in debt service.

    ↗Fiscal Policy under Low Interest Ratesdirect.mit.edu 15th of 22 in this piece

    JavaScript

  5. Our readingThe price level behaves as the aggregate of mostly backward-looking decisions rather than as an asset price, except during hyperinflation, so expected future primary balances barely affect it today.

    Their wordsI believe that, except in times of hyperinflation, the price level does not behave as an asset price but as the aggregate of billions of mostly backward-looking decisions, and that expectations of future primary balances have little effect on the price level today.

    ↗Fiscal Policy under Low Interest Ratesdirect.mit.edu 16th of 22 in this piece

  7. Our readingA fiscal expansion when the economy is already at potential output prompts monetary tightening that dampens or eliminates its effect on output.

    Their wordsIf a fiscal expansion takes place when output is already at potential, monetary policy is likely to tighten, leading to higher interest rates and thus a smaller effect or even no effect of the fiscal expansion on output.

    ↗Fiscal Policy under Low Interest Ratesdirect.mit.edu 17th of 22 in this piece

    interest rates

  9. Our readingFiscal multipliers vary across time and place but are generally nonzero, positive for spending, negative for taxes, and larger when monetary policy cannot offset them.

    Their wordsMultipliers are likely to vary a lot over time and space, but the bulk of the evidence is that they are different from zero, positive for spending, negative for taxes, and that they are stronger when monetary policy does not or cannot react to fiscal policy.

    ↗Fiscal Policy under Low Interest Ratesdirect.mit.edu 18th of 22 in this piece

    JavaScript

  11. Our readingDuring post-2008 fiscal consolidation, the costs of high public debt were overestimated and fiscal multipliers were underestimated, understating the output costs of austerity.

    Their wordsThe costs of high debt were perceived to be very high—higher than they truly were—and the multipliers were underestimated, leading to an underestimate of the output costs of fiscal consolidation.

    ↗Fiscal Policy under Low Interest Ratesdirect.mit.edu 21st of 22 in this piece

    public debt

  13. Our readingAutomatic fiscal stabilizers give fiscal policy an advantage over monetary policy in stabilizing output because they act faster.

    Their wordsIn some dimensions, fiscal policy has an advantage over monetary policy in stabilizing output. The main example is indeed the operation of automatic stabilizers, which act faster than monetary policy can.

    ↗Fiscal Policy under Low Interest Ratesdirect.mit.edu 22nd of 22 in this piece