The main points of uncertainty for economic policy going forward in OECD countries

There are now major dilemmas for economic polic y , with high uncertainty as a result. The salient questions are: How will governments help households faced with rising energy, real estate and food prices? Will they ask companies to help households with wage increases? Will central banks dare to fight inflation, running the risk of triggering a recession and financial crisis? Will governments be able to normalise fiscal policies and reduce fiscal deficits at a time of considerable need s for additional public spending? Only two equilibria are possible in the end: A restrictive equilibrium, where central banks combat inflation, which makes it impossible to conduct expansionary fiscal policies and requires households to be supported by wage increases; An expansionary and inflationary (fiscal dominance) equilibrium, where monetary policy remains expansionary, which enables fiscal policy to also remain expansionary.