Economics & Growth | Fiscal Policy | Monetary Policy & Inflation
In their latest research, Olivier Blanchard, Professor of Economics Emeritus at MIT, and Lawrence Summers, Professor and President Emeritus at Harvard, express their discontent with the zero-bound rate environment in the Western World…
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In their latest research, Olivier Blanchard, Professor of Economics Emeritus at MIT, and Lawrence Summers, Professor and President Emeritus at Harvard, express their discontent with the zero-bound rate environment in the Western World. They encourage a major policy role redistribution – or in other words for Central Banks to turn from monetary to fiscal tools as the primary stimulus apparatus. There is no free lunch, however. Debt, regardless of the current low rates, still leads to a general welfare loss. Also beware the Japanese stagnation experience, where aggressive fiscal stimulus did little to revive indicators.
Why does this matter? It’s baffling to observe the rate cut bonanza across the Western World given the plethora of indicators that it’s doing little to revive slow growth and inflation. We continue questioning Central Bank independence and now turn to research that offers alternative policies in hope that policymakers take note.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)