Here’s your Memorial Day assignment.  You have been called to the table for top-level policy discussions in a large monetary union.  One of the bigger countries in this union has a serious problem.  Their exports are down slightly and there are some longer-run structural issues, but the immediate issue is (1) a housing bubble just burst, resulting in a big fall in tax revenue, (2) the political system seems paralysed, i.e., cannot raise other revenues or cut spending in any sensible fashion, and (3) the market for this government’s debt appears likely to turn very sour.  Sounds like a classic fiscal crisis.

Here are your possible recommendations: Continue reading “Design A Country Rescue Package Here (Comment Competition)” →