Posted by: Dirk | March 14, 2016

Stanley Fischer: Reflections on Macroeconomics Then and Now

Fischer and Dornbusch was my textbook in macroeconomics at the University of Göttingen. Now Stanley Fischer looks back at lessons “of the last 55 years” – and he says 55 years, because in 1961 he read Keynes’s General Theory for the first time. His speech is very interesting (link, hat tip to Irwin Collier). He writes on productivity, secular stagnation, the zero lower bound, fiscal policy, TIPS, etc. Here is an excerpt:

The monetary-fiscal policy mix: There was once a great deal of work on the optimal monetary-fiscal policy mix. The topic was interesting and the analysis persuasive. Nonetheless the subject seems to be disappearing from the public dialogue; perhaps in ascendance is the notion that–except in extremis, as in 2009–activist fiscal policy should not be used at all. Certainly, it is easier for a central bank to change its policies than for a Treasury or Finance Ministry to do so, but it remains a pity that the fiscal lever seems to have been disabled.

We all know that the science of economics is undergoing a paradigm change these years (link1, link2, link3, link4, link5, …), and this is one of the most pressing issues. If we do not allow fiscal policy to get back in the ring, the depression/deflation tag team will beat up the monetary policy guy pretty badly…


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