April 8, 2018

The sure-fire way of stabilizing the real economy or, “all roads lead to Rome”

At Vox, Walentin and Westermark write, “Stabilising the real economy increases average output”: The intro: The Great Recession has generated a debate regarding the potential effects on the long-run levels of output and unemployment of stabilising the real economy (e.g. Summers 2015). This issue takes on additional importance as the current economic situation in some countries, including the US, imply that there is a monetary policy trade-off between stabilising inflation and the real economy. In particular, the unemployment level is low at the same time as inflation is low. More generally, the question at hand is whether policymakers, in particular… Read More