A study in monetary macroeconomics

Abstract

The present monograph was motivated by the Great Recession, which hit the global economy in 2008–09. Tis remarkable event, unparalleled in the postwar era, raised two issues. Te frst, positive in nature, was whether one should be concerned about the future of capitalism. Tis question is vital not only for policymakers and wealth managers but also for everyone with a genuine interest in macroeconomics and political economy. Te second point, a normative one, regarded the usefulness of unprecedented monetary and fscal actions that were initiated during the crisis and lasted for years. When the recession set in, not a single leading macro article suggested that modern economies were in need of large and persistent doses of external stimuli—a medicine so strong that in some cases it triggered sovereign defaults. Quite the contrary, the prevailing paradigm held that monetary and fscal policies were either ineffective or that their effectiveness was due to temporary frictions and limited to short time spans.