BLOG: "One of the big insights of macroeconomics in the last 40 years or so is that, where possible, demand management is best left to monetary rather than fiscal policy. Incredibly, this reasoning successfully permeated the thinking of policy makers in this country and elsewhere. The only time you will find any mainstream academic economist supporting a fiscal stimulus is at times like the present, when short-term interest rates are close to zero. In this setting, some New Keynesian models can be used to support fiscal stimulus, and this analysis has been widely used by opponents of the government’s actions to reduce the deficit". Read Oliver Latham on why returning to conventional monetary policy will end the New Keynesian calls for fiscal stimulus. CPSne.ws/13zA6FN
Posted on: Tue, 23 Jul 2013 09:08:16 +0000
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