Additionally, raising interest rates would be a form of expansionary fiscal policy.

Denmark grew, despite fiscal cuts, because interest rates, initially in the double digits, came down.

Will near zero interest rates, financial sector bailouts, and fiscal stimulus work? What else could be done?

In some countries, lower military expenditures and interest rates has helped to improve a weak fiscal position.

This could be achieved by monetary and fiscal policy low interest rates and large state investment programs.

Will the government liberalize interest rates or loosen capital controls? How will the fiscal system be revamped?

Moreover, interest rates cannot become negative in nominal terms, and rising public debt may increasingly disable fiscal policy.

Western Europe too needed to increase domestic demand by bringing down interest rates substantially while avoiding premature fiscal contraction.

The combination of loose fiscal policy and tight monetary policy will mean high interest rates, sluggish investment, and slow growth.

With a smaller debt burden and interest payments, Egypt s fiscal position would improve significantly, and threats to economic growth would recede.

Should a country violate the fiscal compact, it would wholly or partly forfeit its reward and be obliged to pay interest on the debt owned by the SPV. That would impose tough fiscal discipline, indeed.

When the markets see that coming, they will drive Italy s sovereign interest rates even lower. Given Italy s very large national debt, interest payments add more than 5 of GDP to the fiscal deficit.

But no one has the right to complain about the central bank s high interest rate, appreciated currency policy when fiscal policy remains too lax for interest rates to be reduced without risking price stability.

Today, the US is staring at a present value fiscal gap (present value of projected non interest spending, minus taxes) of 202 trillion.

The World Bank has already expressed interest in providing assistance for institutional capacity building in sectors such as fiscal management and data collection.

To be sure, there has been some progress in the eurozone periphery in the last few years fiscal deficits have been reduced, and some countries are now running primary budget surpluses (the fiscal balance excluding interest payments).

Moreover, fiscal and sovereign debt strains are becoming worse as interest rate spreads for Spain and Italy have returned to their unsustainable peak levels.

The result in Japan would then be rising real interest rates as the low private saving rate runs head on into large fiscal deficits.

In most cases, the interest burden on fiscal budgets was stabilized, although in proportions that varied from 1 to 4 per cent of GDP.

Additionally, raising interest rates would be a form of expansionary fiscal policy. This is because Japan has a large public debt, and increasing interest payments on that debt would put extra money in the hands of households.

High public debt levels would still have to be reduced to create fiscal space and keep interest rates low enough to restore long term confidence.

The fifth option is to tighten fiscal policy and reduce budget deficits with the aim of lowering the high interest rates that drive the inflows.

Growth would restore confidence that Greece could repay its debts, causing interest rates to fall and leaving more fiscal room for further growth enhancing investments.

Countries can reduce their national debt by narrowing the budget deficit or achieving a primary surplus (the fiscal balance minus interest payments on outstanding debt).

Sound macroeconomic policies relate to sustainable fiscal and external balances, moderate inflation, low and stable interest rates, stable exchange rates and increasingly stable asset prices.

Fiscal Follies

What's fiscal ?

Meanwhile, the state lurches from fiscal tragedy to fiscal farce.

The original vision was that this set up would help to assure a growth friendly policy mix, with fiscal prudence keeping interest rates low on average.

British government bonds now offer significantly lower interest rates than those of France, Italy, or Spain, even though the United Kingdom s fiscal position is considerably worse.

Fiscal consolidation was not, however, the result of formal fiscal rules.

As I have argued before, the endgame to the financial bailouts and fiscal expansion will almost certainly mean higher interest rates, higher taxes, and, quite possibly, inflation.

Developing country central banks keep interest rates artificially low to ensure sufficient low cost financing for the public sector, while avoiding large fiscal deficits and high inflation.

In this environment, a further fiscal stimulus may prove counterproductive, with the extra spending counterbalanced by the negative effect on the housing market of higher interest rates.

Europe s Fiscal Wormhole

America s Fiscal Isolationism

Fiscal Closing Time?

Fiscal Child Abuse

Germany s Fiscal Follies

India s Fiscal Follies

Shorting Fiscal Consolidation

Alternative Fiscal Medicine?

Country _ Fiscal year _

Country _ Fiscal year _

Fiscal stimulus is turning into fiscal austerity and a drag on growth.