Fiscal adjustment becomes like walking up the down escalator when growth-promoting spending is cut so much as to lower growth and thus the present value of future tax revenues to a degree that more than offsets the improvement in the cash deficit. Although short-term cash flows matter, a...

The author examines new conceptual views of economic growth which focus attention on the importance of initial conditions, random shocks, and changes in expectations with special reference to some countries in East Asia and Latin America. He points out that according to theory and evidence,...