Olivier Blanchard: Η νομισματική πολιτική δεν μπορεί να κάνει τα πάντα

“If expansionary fiscal policy is needed at the euro level, it is likely to be under supplied. The reason is spillovers, i.e. the externalities arising in a group of highly integrated countries. The increase in domestic demand from the fiscal expansion partly falls on imports rather than on an increase demand for domestic output. As a result, countries are likely to do too little and the euro output gap is likely to remain. How can this be solved? Conceptually, in one of two ways,” says Olivier Blanchard, former Chief Economist of the International Monetary Fund.

 
“First, through a coordinated fiscal expansion, the way it was done by the G20 in 2009, with each country issuing debt. This would however have to be limited to the coalitions of the able… Second, through a common budget, financed through euro bonds. But this implies risk sharing, and we know the political difficulties of doing so…I realize that what I have offered is blue sky thinking, ignoring the complex euro geo-politics which will determine the outcome in the end. But it is the right place to start…Monetary policy has transformed itself. Now is the time to do the same for the rest of the macro policy architecture.”