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Krugman has come to believe a report by an IMF official that politics makes it impossible to implement fiscal policy effectively when there is serious recession. Our experience in the US as well as the experience in Japan and in parts of Europe demonstrates the difficulty. There is always a political reaction against government intervention into the economy by politicians and by conservative economists who support the political reaction. There is more support for monetary policy, but it is ineffective when interest rates approach the zero bound as they have in the US today.
The official target rate for inflation is also a problem. It is set at 2% in the US. During a recession prices tend to fall and that may stimulate spending and encourage a recovery. Unfortunately, if this occurs when inflation is at the target rate of 2%, a fall in prices can lead to a deflationary spiral that is hard to stop. Krugman argues that the inflation target should be reset at 5% in order to use monetary policy more effectively during a recession.
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