Across European capitals and in Washington DC, economic policymakers are becoming increasingly concerned about the potential for another recession and are considering which monetary and fiscal policy instruments might be used to prevent it. Studying more than 60 years of economic cycles, Eddie Gerba finds that the ‘real’ economy has become inextricably linked to the financial economy in the […]
The Fed’s rate rise may not provide enough of a boost to the financial sector to allow the US recovery to take off.
Last week, the US Federal Reserve announced that it would increase its Fund Rate by 0.25 percent – the first such increase in nine years. Eddie Gerba writes that under normal economic conditions such an interest rate rise would help savers, lead to more balanced investments, and help firm productivity. But, he points out, conditions post-Great Recession are far […]
The Fed must explicitly react to movements on the stock market if it values stability and wishes to avoid large consumption and output swings
Over the past few years, the Fed has been blamed for fuelling the post-2001 financial market boom by maintaining record-low interest rates and ignoring the developments on the stock market. But, should central bankers really care about stock market swings when there is so much uncertainty and noise involved? Eddie Gerba returns to this pre-crisis debate and re-examines the […]
Spending rises are more effective in expanding the economy by as much as 20 percent compared to tax cuts
Both fiscal and monetary authorities have engaged in ‘unconventional’ policies over the past few years in order to bring the Great Recession under control. But, have these actions been intentionally coordinated, and what has been their economic impact? More fundamentally, has there ever been a systematic or regular coordination between fiscal and monetary policy in the US? Eddie Gerba […]