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This paper argues that limited asset market participation is crucial in explaining U.S. macroeconomic performance and monetary policy before the 1980s, and their changes thereafter. We develop an otherwise standard sticky-price dynamic stochastic general equilibrium model, which implies that at low asset-market participation rates, the interest rate elasticity of output (the slope of the IS curve) becomes positive - that is, "non-Keynesian." Remarkably, in that case, a passive monetary policy rule ensures equilibrium determinacy and maximizes welfare. Consequently, we argue that the policy of the Federal Reserve System in the pre-Volcker era, often associated with a passive monetary policy rule, was closer to optimal than conventional wisdom suggests and may thus have remained unchanged at a fundamental level thereafter. We provide institutional and empirical evidence for our hypothesis, in the latter case using Bayesian estimation techniques, and show that our model is able to explain most features of the "Great Inflation.".
Electronic books. -- local. --- Inflation (Finance). --- Monetary policy. --- Finance --- Business & Economics --- Money --- Inflation (Finance) --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Natural rate of unemployment --- Banks and Banking --- Finance: General --- Inflation --- Macroeconomics --- Price Level --- Deflation --- Business Fluctuations --- Cycles --- Financial Markets and the Macroeconomy --- Monetary Policy --- Central Banks and Their Policies --- Studies of Particular Policy Episodes --- Economic History: Macroeconomics --- Growth and Fluctuations: U.S. --- Canada: 1913 --- -Economic History: Financial Markets and Institutions: U.S. --- General Financial Markets: General (includes Measurement and Data) --- Macroeconomics: Consumption --- Saving --- Wealth --- Interest Rates: Determination, Term Structure, and Effects --- Securities markets --- Consumption --- Hyperinflation --- Real interest rates --- Financial markets --- Prices --- National accounts --- Financial services --- Capital market --- Economics --- Interest rates --- United States
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We discuss the main fiscal policy issues in the Eurozone. Our goal is pedagogical: we do not make any new proposal, but try to represent fairly the various sides of the debate. We focus on two issues that are at the core of the current debate. The first is that, right from the start, the government deficit and debt were the key objects of contention in the debate that led to the creation of the Eurozone -- and they still are, although the reasons have changed. The second, obvious issue is that a currency union implies the loss of a country-specific instrument, a national monetary policy. This puts a higher burden on fiscal policy as a tool to counteract shocks, a burden that might be even heavier now that the European Central Bank has arguably reached the Zero Lower Bound. Two obvious solutions are mutual insurance between countries; and a centralized stabilization policy. Yet both have been remarkably difficult to come by. We argue that the main reason is fear of persistent, unidirectional transfers between countries, an issue that largely reflects a Northern vs. Southern Europe divide.
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"L'hélicoptère monétaire" : cette métaphore extravagante paraît avoir aujourd'hui envahi les débats d'ordinaire si sérieux entre économistes financiers et monétaires. Pourquoi ce terme tiré d'un texte de Milton Friedman publié en 1969 ressurgit-il avec autant de force aujourd'hui ? Qu'en est-il vraiment d'un outil de politique publique présenté par certains comme un instrument miracle et par d'autres comme une solution fantasque, voire dangereuse ? On tente ici de décrypter les réalités que recouvre la proposition d'injecter de la monnaie dans l'économie sous forme de transferts directs aux individus. À l'heure où la question de l'abolition de la dette des États fait plus que jamais débat, ce petit livre donne les clés pour en comprendre tous les enjeux.
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