The case for lowering taxes

As macro policies go governments have two main tools to implement them: fiscal and monetary policy. Since the start of the current crisis in 2007 both of them have been used in an attempt to push up aggregate demand. Until now the results are not what anyone would reasonably expect from looking at the public debt growth and from key policy rates near zero. Basically,  policy makers supplied fiscal shocks one after another (increased government expenditures) while monetary policy accommodated those shocks by increasing money supply (lowering interest rates).

The right incentives will keep capital in Romania

One major concern for Romania is that foreign banks present on the local market will use funds available for lending to increase capitalization in their headquarters. The Romanian officials assure us that at their request the EU leaders agreed to “regulate these capital flows”. It is not the first time we would see capital controls introduced in the region. The first instance was in the spring of 2009 when Banks operating in the CEE region “agreed” to keeping a certain level of funding their assets. It did not work very well as banks kept the exposure but did not credit the private economy.