Thoughts on Policies and the Policy Framework After a Financial Crisis

Abstract

Attention from policymakers tends to concentrate on the short-term effects of crisis policies on growth and financial stability. This paper investigates side-effects of current crisis policies from the perspective of the classic debate between Keynes and Hayek. It argues that three issues remain largely unaddressed: a lack of confidence, a distorted structure of the economy and policy framework, and too high debt levels. Continuing expansionary and unconventional policies may be counterproductive and it may be better to shift the focus of policies towards real and financial adjustment.

Full publication: Threat of fiscal dominance?

Keywords: Policy framework, financial crisis, unconventional policies, Keynes, Hayek

JEL Classification: E12, E58, E61