Scarring, hysteresis, and investment in Europe
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2023-02-06Estado
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- Major economic downturns have left important scars in the path of economic expansion, despite forceful and regular attempts to support aggregate demand. This column summarises discussions at a recent workshop on scarring effects and strategies to avert or minimise them. Fiscal policy can play an important role in limiting hysteresis – a term coined in the 1980s – particularly by promoting government and private investment. However, the political economy of fiscal policymaking typically trades off long-term benefits for short-term gains.
Scarring, hysteresis, and investment in Europe
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.Economic downturns, Scarring effects, Fiscal policy, Hysteresis