A study in monetary macroeconomics.

Abstract

The present monograph was motivated by the Great Recession, which hit the global economy in 2008–09. This remarkable event, unparalleled in the postwar era, raised two issues. The first, positive in nature, was whether one should be concerned about the future of capitalism. This question is vital not only for policymakers and wealth managers but also for everyone with a genuine interest in macroeconomics and political economy. The second point, a normative one, regarded the usefulness of unprecedented monetary and fiscal 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 fiscal policies were either ineffective or that their effectiveness was due to temporary frictions and limited to short time spans.