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The recent recession has brought fiscal policy back to the forefront, with economists and policy makers struggling to reach a consensus on highly political issues like tax rates and government spending. At the heart of the debate are fiscal multipliers, whose size and sensitivity determine the power of such policies to influence economic growth. Fiscal Policy after the Financial Crisis focuses on the effects of fiscal stimuli and increased government spending, with contributions that consider the measurement of the multiplier effect and its size. In the face of uncertainty over the sustainability of recent economic policies, further contributions to this volume discuss the merits of alternate means of debt reduction through decreased government spending or increased taxes. A final section examines how the short-term political forces driving fiscal policy might be balanced with aspects of the long-term planning governing monetary policy. A direct intervention in timely debates, Fiscal Policy after the Financial Crisis offers invaluable insights about various responses to the recent financial crisis.
This book presents a notable group of macroeconomists who describe the unprecedented events and often extraordinary policies put in place to limit the economic damage suffered during the Great Recession and then to put the economy back on track. Contributers include Barry Eichengreen; Gary Burtless; Donald Kohn; Laurence Ball, J. Bradford DeLong, and Lawrence H. Summers; and Kathryn M.E. Dominguez.
Walter Bagehot noticed once that “John Bull can stand many things, but he cannot stand two per cent.” Well, for several years, he has had to stand interest rates well below that, in some countries even below zero. However, despite this sacrifice, the economic recovery from the Great Recession has been disappointingly weak. This book’s aim is to answer this question. The central thesis of the book is that the standard understanding of the monetary transmission mechanism is flawed. That understanding adopts erroneous assumptions—such as, that low interest rates always stimulate economic growth by boosting the credit supply, investment, and consumption—and does not fully take into account several unintended channels of monetary policy, such as risk-taking, high level of debt, or zombification of the economy. In other words, the effectiveness of monetary policy is limited during economic downturns accompanied by the debt overhang and the balance sheet recession, and generates negative effects, which can make the policy counterproductive. The author provides a thorough analysis of the issues related to the interest rates in the conduct of monetary policy, such as the risk-taking channel of monetary policy, the portfolio-balance channel and the wealth effect, zombie firms in the economy, the misallocation of resources, as well as the neutral interest rate targeting and the difference between the neutral and natural interest rate and the negative interest rate policy. The book is written in an accessible and engaging manner and will be a valuable resource for scholars of monetary economics as well as readers interested in (unconventional) monetary policy.
Controlling inflation is among the most important objectives of economic policy. By maintaining price stability, policy makers are able to reduce uncertainty, improve price-monitoring mechanisms, and facilitate more efficient planning and allocation of resources, thereby raising productivity. This volume focuses on understanding the causes of the Great Inflation of the 1970s and ’80s, which saw rising inflation in many nations, and which propelled interest rates across the developing world into the double digits. In the decades since, the immediate cause of the period’s rise in inflation has been the subject of considerable debate. Among the areas of contention are the role of monetary policy in driving inflation and the implications this had both for policy design and for evaluating the performance of those who set the policy. Here, contributors map monetary policy from the 1960s to the present, shedding light on the ways in which the lessons of the Great Inflation were absorbed and applied to today’s global and increasingly complex economic environment.
A collection of essays about the US Great Recession of 2007 to 2009 and the subsequent stagnation from prominent scholars.
No issue is more fundamental in contemporary macroeconomics than the causes of the recent Great Recession. The standard view is that the banks were to blame because they took on too much risk, ‘went bust’ and had to be bailed out by governments. But very few banks actually had losses in excess of their capital. The counter-argument presented in this stimulating new book is that the Great Recession was in fact caused by a collapse in the rate of change of the quantity of money. The book’s argument echoes that on the causes of the Great Depression made by Friedman and Schwartz in their classic book A Monetary History of the United States.
The global financial crisis and the ensuing Great Recession raised concerns about adjustment fatigue, deflation, currency wars, and secular stagnation that presented a sense of déjà vu: similar concerns had arisen at the time of the Great Depression and at the end of World War II. As with earlier crises, these concerns prompted calls for greater international policy cooperation—both to achieve a sustainable recovery from the crisis and to prevent future crises. This volume compiles papers from a 2015 symposium of eminent scholars convened by the IMF to discuss how history can inform current debates about the functioning and challenges of the international monetary system. An introductory chapter sets the stage for the other chapters in the volume by giving a broad overview of the performance of the international monetary system over the past century, highlighting the key events and challenges that shaped it. Subsequent sections look at historical antecedents of today’s challenges, describe how the modern international monetary system has been—and continues to be—shaped through international financial diplomacy, provide a present-day perspective, and examine the analytics of international policy coordination.
Officially over in 2009, the Great Recession is now generally acknowledged to be the most devastating global economic crisis since the Great Depression. As a result of the crisis, the United States lost more than 7.5 million jobs, and the unemployment rate doubled—peaking at more than 10 percent. The collapse of the housing market and subsequent equity market fluctuations delivered a one-two punch that destroyed trillions of dollars in personal wealth and made many Americans far less financially secure. Still reeling from these early shocks, the U.S. economy will undoubtedly take years to recover. Less clear, however, are the social effects of such economic hardship on a U.S. population accustomed to long periods of prosperity. How are Americans responding to these hard times? The Great Recession is the first authoritative assessment of how the aftershocks of the recession are affecting individuals and families, jobs, earnings and poverty, political and social attitudes, lifestyle and consumption practices, and charitable giving. Focused on individual-level effects rather than institutional causes, The Great Recession turns to leading experts to examine whether the economic aftermath caused by the recession is transforming how Americans live their lives, what they believe in, and the institutions they rely on. Contributors Michael Hout, Asaf Levanon, and Erin Cumberworth show how job loss during the recession—the worst since the 1980s—hit less-educated workers, men, immigrants, and factory and construction workers the hardest. Millions of lost industrial jobs are likely never to be recovered and where new jobs are appearing, they tend to be either high-skill positions or low-wage employment—offering few opportunities for the middle-class. Edward Wolff, Lindsay Owens, and Esra Burak examine the effects of the recession on housing and wealth for the very poor and the very rich. They find that while the richest Americans experienced the greatest absolute wealth loss, their resources enabled them to weather the crisis better than the young families, African Americans, and the middle class, who experienced the most disproportionate loss—including mortgage delinquencies, home foreclosures, and personal bankruptcies. Lane Kenworthy and Lindsay Owens ask whether this recession is producing enduring shifts in public opinion akin to those that followed the Great Depression. Surprisingly, they find no evidence of recession-induced attitude changes toward corporations, the government, perceptions of social justice, or policies aimed at aiding the poor. Similarly, Philip Morgan, Erin Cumberworth, and Christopher Wimer find no major recession effects on marriage, divorce, or cohabitation rates. They do find a decline in fertility rates, as well as increasing numbers of adult children returning home to the family nest—evidence that suggests deep pessimism about recovery. This protracted slump—marked by steep unemployment, profound destruction of wealth, and sluggish consumer activity—will likely continue for years to come, and more pronounced effects may surface down the road. The contributors note that, to date, this crisis has not yet generated broad shifts in lifestyle and attitudes. But by clarifying how the recession’s early impacts have—and have not—influenced our current economic and social landscape, The Great Recession establishes an important benchmark against which to measure future change.