Lawrence Summers

Britain and the limits of austerity

By Lawrence Summers
May 5, 2014

The Bank of England is seen in the City of London

The British economy has experienced the most rapid growth in the G7 over the last few months. It increased at an annual rate of more than 3 percent in the last quarter — even as the U.S. economy barely grew, continental Europe remained in the doldrums and Japan struggled to maintain momentum in the face of a major new valued added tax increase.

The economics of austerity

By Lawrence Summers
June 3, 2013

Paced by housing and energy, the U.S. recovery is likely to accelerate this year and budget deficit projections have declined as well.  Unfortunately the European economy remains stagnant though there is some evidence that stimulative policies are gaining traction in Japan.  Around the world the idea of “austerity” is fiercely debated.  This all makes a reconsideration of the principles that should guide fiscal policy opportune. This requires recognizing that policies need to be set in light of economic circumstances.

The lessons of Reinhart-Rogoff

By Lawrence Summers
May 6, 2013

The economics commentariat and no small part of the political debate in recent weeks has been consumed with the controversy surrounding the work of my Harvard colleagues (and friends) Carmen Reinhart and Ken Rogoff (RR). Their work had been widely interpreted as establishing that economic growth was likely to stagnate in a country once its government debt-to-GDP ratio exceeded 90 percent. Scholars at the University of Massachusetts have demonstrated and RR have acknowledged that they made a coding error that resulted in their omitting some relevant data in forming their results and also have noted that using updated data for several countries reduces substantially the strength of some of the statistical patterns they asserted. Issues have also arisen with respect to how RR weighted observations in forming the averages on which they base their conclusions.

Job #1 for the IMF: Stay the course and avoid lurches to austerity

By Lawrence Summers
October 15, 2012

If the global economy was in trouble before the annual World Bank and IMF meetings in Tokyo this past weekend, it is hard to believe that it is now smooth sailing. Indeed, apart from the modest stimulus provided to the Japanese economy by all the official visitors to Tokyo, it’s not easy to see what of immediate value was accomplished.

Why the UK must reverse its economic course

By Lawrence Summers
September 17, 2012

It is the mark of science and perhaps rational thought more generally to operate with a falsifiable understanding of how the world operates. And so it is fair to ask of the economists a fundamental question: What could happen going forward that would cause you to substantially revise your views of how the economy operates and to acknowledge that the model you had been using was substantially flawed? As a vigorous advocate of fiscal expansion as an appropriate response to a major economic slump in an economy with zero or near-zero interest rates, I have for the last several years suggested that if the British economy – with its major attempts at fiscal consolidation – were to enjoy a rapid recovery, it would force me to substantially revise my views about fiscal policy and the workings of the macroeconomy more generally.