BEYOND CRISIS MANAGEMENT
Presentation of the World Economic Outlook & European Regional Economic Outlook
Paris School of Economics – Paris, October 22^nd, 3.30 pm
Maison des Sciences Economiques, 106 - 112 boulevard de L’Hôpital, Paris

Helge Berger and Rupa Duttagupta

Discussant - Fabrizio Coricelli

Abstract
The International Monetary Fund (IMF), in association with the Paris School of Economics, is presenting the Fall 2010 IMF World Economic Outlook (WEO) and the European Regional Economic Outlook (REO). The presentation will take place on October 22, 2010, at the Paris School of Economics. The event will bring together policy-makers, academics, journalists, staff from international organizations and selected representatives of civil society, to discuss the key macroeconomic challenges going forward. It will provide an opportunity for the press to report on the newly released Regional Outlook.
With strong policy action to contain sovereign debt problems in the euro area, the recovery continues. But lingering uncertainties and market pressures make for moderate and unequal growth across advanced Europe. The October 2010 issue of the REO: Europe discusses the outlook and the short term challenges it creates for macroeconomic and financial sector policies. It also sheds light on the governance issues revealed by the crisis, arguing that better policy frameworks, in particular at the euro area level, promise a stronger Europe.
The presentation will then focus on fiscal issues, based on the WEO chapter “Will it Hurt? Macroeconomic Effects of Fiscal Consolidation.” The chapter examines the effects of fiscal consolidation—tax hikes and government spending cuts—on economic activity. The empirical analysis finds that fiscal consolidation typically reduces output and raises unemployment in the short term. At the same time, interest rate cuts, a fall in the value of the currency, and a rise in net exports usually soften the contractionary impact. Consolidation is more painful when it relies primarily on tax hikes; this occurs largely because central banks typically provide less monetary stimulus during such episodes, particularly when they involve indirect tax hikes that raise inflation. Also, fiscal consolidation is more costly when the perceived risk of sovereign default is low. These findings suggest that budget deficit cuts are likely to be more painful if they occur simultaneously across many countries, and if monetary policy is not in a position to offset them. Over the long term, reducing government debt is likely to raise output, as real interest rates decline and the lighter burden of interest payments permits cuts to distortionary taxes.
We hope that you will choose to join us for this presentation.

We would be grateful if you could RSVP to Sylvain Riffé Stern - sylvain.riffe parisschoolofeconomics.eu.

Please do not hesitate to share with your colleagues and staff, whom we hope will come to contribute to the discussion.

Sincerely yours,

The organisation Committee

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• Helge Berger is Deputy Division chief in the Euro Area and EU Policies Division of the IMF’s European Department. He received his Ph.D. and the venia legendi for economics from University of Munch. He holds the chair of monetary economics at Free University Berlin (on leave), where he has also served as Associate Dean. He has previously taught at Princeton University as a John Foster Dulles Visiting Lecturer, served as Research Director of the Munich-based CESifo network, and has been a visiting scholar at the European Central Bank, the IMF, and various academic institutions.

• Rupa Duttagupta is the Deputy Division Chief in the World Economic Studies Division of the IMF’s Research Department. She holds a Ph.D. in Economics from the University of Maryland in the United States. Prior to joining the Research Department, she worked on several emerging, developing and advanced economies spanning the IMF’s Asia and Pacific, Monetary and Capital Markets, Western Hemisphere, and Strategy, Policy and Review Departments. Her research interests include international trade and finance issues with a focus on emerging market economies.

• Fabrizio Coricelli is currently Professor of Economics at Université Paris 1, Panthéon-Sorbonne. He is also Research Fellow at Paris School of Economics and CEPR. He holds a Ph.D. in Economics from the University of Pennsylvania, Philadelphia. Before his current appointment, he worked at the International Monetary Fund and at the World Bank in Washington for six years. He also worked as Economic Advisor at the European Commission in Brussels and as Director for Policy Studies at EBRD in London.