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The difficult task for monetary policy and the call for a fiscal adjustment
Jönköping University, Jönköping International Business School, JIBS, Economics. Amuletum Invest AB.
2022 (English)Report (Other academic)
Abstract [en]

Inflation in the US and other economies continues to climb. I discuss reasons why a monetary contraction willnot be enough to bring inflation back to target levels without causing a recession, and that a fiscal adjustmentmay be necessary as additional measure. The main obstacle for monetary policy to contain the gallop of pricesis the resulting highly negative real interest rates and the high debt levels observed, which make the call for afiscal adjustment. Otherwise, an even higher inflationary spiral may occur, as debtors may wish to takeadvantage of the highly negative real interest rates and engage in even more debt and spending. One of thosedebtors is the government, which constant deficits and increasing debt may trigger a loss of faith in thecurrency, keeping inflation on the rise. A fiscal adjustment is pertinent. I also discuss policy scenarios andimplications for investments. 

Place, publisher, year, edition, pages
Sandared: Amuletum Invest AB , 2022. , p. 11
Series
AM Report ; Vol. 1, Nr. 1
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-58237OAI: oai:DiVA.org:hj-58237DiVA, id: diva2:1688685
Available from: 2022-08-19 Created: 2022-08-19 Last updated: 2022-08-19Bibliographically approved

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De Rezende, Rafael B.

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