Our Shrinking Economic Toolkits — Jayati Ghosh

For the last four decades, mainstream economists and policymakers have been wedded to fixed dogmas. Their blind belief in fiscal discipline and consolidation, and resulting refusal to consider more public spending even in an obvious downturn, now threatens the very stability of societies....

Project Syndicate
Our Shrinking Economic Toolkits

Jayati Ghosh | Professor of Economics at the Centre for Economic Studies and Planning, School of Social Sciences, at the Jawaharlal Nehru University, in New Delhi

See also at Project Syndicate

With the German economy close to recession, European Central Bank President Mario Draghi has rightly urged eurozone governments to provide more fiscal stimulus. And acknowledging the interaction between fiscal and monetary policy would leave critics much less room for ECB-bashing.

Germany Versus the ECB

Hans-Helmut Kotz, a former member of the executive board of Deutsche Bundesbank, is Program Director of the SAFE Policy Center at Goethe University in Frankfurt and a resident fellow at the Center for European Studies at Harvard University

At a time of slowing global growth and ultra-low interest rates, major central banks continue to “push on the string” of further monetary easing. But what if the same old rules – or even the same old economic theories – no longer apply?
In this Big Picture, Harvard’s Lawrence H. Summers and Anna Stansburyargue that central banks have exhausted their ability to control inflation and unemployment levels through traditional channels, and should admit as much. Roger E.A. Farmer of the University of Warwick agrees, and suggests that it is not just the traditional tools that are broken; it’s the entire underlying theory. Making matters worse, economists Ernest Liu, Atif Mian, and Amir Sufi show that today’s loose monetary policies are not just ineffective, but possibly even contractionary, and thus entirely counter-productive.

 No Game in Town?