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Another example of monetary offset

Yawn. Another year, another example of monetary offset. As it became clear in late July that Congress was unlikely to extend the stimulus, Keynesian pundits went into full freakout mode, warning that the recovery would be aborted. Perhaps it will be aborted—I can’t predict the path of the Covid-19 epidemic. But one thing seems clear, […]

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 […]