{"id":42332,"date":"2019-01-06T15:36:12","date_gmt":"2019-01-06T20:36:12","guid":{"rendered":"https:\/\/olduvai.ca\/?p=42332"},"modified":"2019-01-06T15:36:12","modified_gmt":"2019-01-06T20:36:12","slug":"central-bankers-fiscal-constraints","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=42332","title":{"rendered":"Central Bankers\u2019 Fiscal Constraints"},"content":{"rendered":"
\n
\n
\"colleagues<\/picture>Sirinarth Mekvorawuth\/EyeEm\/Getty Images<\/span><\/figure>\n<\/div>\n<\/div>\n
\n
\n

Central Bankers\u2019 Fiscal Constraints<\/a><\/h3>\n
\n
\n

With policy interest rates near zero in most advanced economies (and just above 2% even in the fast-growing US), there is little room for monetary policy to maneuver in a recession without considerable creativity. But those who think fiscal policy alone will save the day are stupefyingly naive.<\/p>\n<\/div>\n

\n

CAMBRIDGE \u2013 If you ask most central bankers around the world what their plan is for dealing with the next normal-size recession, you would be surprised how many (at least in advanced economies) say \u201cfiscal policy.\u201d Given the high odds of a recession over the next two years \u2013 around 40% in the United States<\/a>, for example \u2013 monetary policymakers who think fiscal policy alone will save the day are setting themselves up for a rude awakening.<\/p>\n

Yes, it is true that with policy interest rates near zero in most advanced economies (and just above 2% even in the fast-growing US), there is little room for monetary policy to maneuver in a recession without considerable creativity. The best idea is to create an environment in which negative interest-rate policies<\/a>can be used more fully and effectively. This will eventually happen, but in the meantime, today\u2019s overdependence on countercyclical fiscal policy is dangerously na\u00efve.<\/p>\n

There are vast institutional differences between technocratic central banks and the politically volatile legislatures that control spending and tax policy. Let\u2019s bear in mind that a typical advanced-economy recession lasts only a year or so, whereas fiscal policy, even in the best of circumstances, invariably takes at least a few months just to be enacted.<\/p>\n

In some small economies \u2013 for example, Denmark (with 5.8 million people) \u2013 there is a broad social consensus to raise fiscal spending as a share of GDP. Some of this spending could easily be brought forward in a recession.<\/p>\n

\u00a0\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Sirinarth Mekvorawuth\/EyeEm\/Getty Images Central Bankers\u2019 Fiscal Constraints With policy interest rates near zero in most advanced economies (and just above 2% even in the fast-growing US), there is little room for monetary policy to maneuver in a recession without considerable creativity. But those who think fiscal policy alone will save the day are stupefyingly naive. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[124,431,1508,534,8402,1264],"class_list":["post-42332","post","type-post","status-publish","format-standard","hentry","category-economics","tag-central-banks","tag-interest-rates","tag-kenneth-rogoff","tag-monetary-policy","tag-project-syndicate","tag-recession"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/42332","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=42332"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/42332\/revisions"}],"predecessor-version":[{"id":42333,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/42332\/revisions\/42333"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=42332"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=42332"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=42332"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}