Fiscal and Monetary Policy Anchors in an Era of Global Excess Saving
David Dodge O.C., former governor, Bank of Canada will deliver the 2020 Harry Kitchen Lecture in Public Policy via Zoom.
In normal times stabilization policy anchored on both a flexible inflation target by an independent central bank and a stable long-run debt/GDP target by the treasury works reasonably well to dampen the amplitude of the business cycle. But in times when the structure of the economy is generating persistent conditions of excess supply or excess demand (sharply lower or higher real natural rate of interest), some modification of these anchors (or better coordination of monetary and fiscal levers) may be needed to stabilize the economy. This paper considers what modifications to these anchors to the macroeconomic policy could be helpful in the context of today’s apparent global condition of excess supply.
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