Report
Patrick Artus

Would a completely different economic policy mix not be better?

The prevailing economic policy mix in OECD countries is well known: fiscal policy is highly expansionary during recessions, but remains expansionary during expansion periods, leading to an endless rise in the public debt ratio. Continued government solvency then requires monetary policy to be endlessly expansionary, with a large increase in the quantity of money. The serious drawbacks of this constant monetary expansion are well known: asset price bubbles and financial crises, rising wealth inequality. So a completely different economic policy mix may be better: F iscal policy that is highly expansionary during recessions but restrictive during growth periods, resulting in a stable public debt ratio in the long term and no threat to government solvency; Which would allow monetary policy to focus on the long-term objective of supplying the appropriate quantity of liquidity for the economy ( the countercyclical action is performed by fiscal policy and public debt monetisation is not needed to make governments solvent).
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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