A lovely debate over what excites the market's "animal spirits" more, whether spending or spending cuts, is taking place.
The US seems to remain in favor of increased spending in order to prop up its economy and strengthen job growth. Europe and other G20 nations are persuaded that austerity is more fitting. The policy makers on either side have their own set of economists arguing in favour of their approach. On the pro-stimulus side, are the new Keynesians. On the anti-stimulus end are those who support the work of Harvard economist Alesina.
The proponents and their key arguments are summarised in this BusinessWeek article, entitled Keynes vs. Alesina. Alesina Who?.
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