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The Fed did monetary offset and the ECB did not

Who just posted this right-wing market monetarist interpretation of recent events? Well, the euro area has had a (slightly) shrinking population aged 15-64 since 2008, while the US has not (although our growth is slowing). How does this affect the picture, and what changes? Europe still does badly, but not by as bad a margin […]

Romer and Romer on Sanders and monetary offset

Christina and David Romer are both Keynesian economists with impeccable credentials.  Thus I thought you might be interested in their views on monetary offset: Massive demand-side stimulus in an economy closing in on its productive capacity would have one of two effects. First—and most likely—it would lead the Federal Reserve to raise interest rates, offsetting […]

Monetary offset and the time inconsistency problem

I recently ran across a very revealing article from April 24, 2012: NEW YORK, April 24 (Reuters) – Federal Reserve policymakers are sounding the alarm over a “fiscal cliff” at the end of this year, when scheduled U.S. tax hikes and spending cuts could pose a big threat to the fragile economic recovery. Along with […]

Mark Sadowski on fiscal austerity, with and without monetary offset

In recent years Mark Sadowski has done a lot of empirical work on fiscal austerity, some of which has appeared in this blog.  Now he has a new study, but first let’s review the two competing theories: 1.  Keynesian:  Fiscal austerity is contractionary at the zero bound regardless of whether you have an independent central […]

Monetary offset in Australia

Stephen Kirchner quotes from Treasurer Wayne Swan’s briefing notes from August 8, 2008: There are three broad considerations the Government would need to keep in mind in taking a decision to engage in discretionary [fiscal] action: – The Reserve Bank through its control over interest rates, determines the overall level of aggregate demand in the economy, […]