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Same ECB medicine, higher dosage – good but more needed

March 12, 2016 by andrew36 Leave a Comment

The ECB has announced a further expansionary shift by beefing up a range of existing policy instruments. Barring unexpected positive shocks this will not be enough to break out of a deflationary environment and convincingly underpin growth and a rapid reduction in unemployment. For that to happen fiscal policy must turn expansionary and/or the ECB must cast caution to the winds and adopt new tools. At the press conference following the policy announcement ECB President Draghi gave a tantalizing glimpse that new tools may indeed be on the way: we may yet see monetary financing of fiscal policy, or helicopter money as it is popularly known. [Read more…]

Filed Under: Analysis Tagged With: ECB, fiscal policy, helicopter money, inflation, interest rates, Mario Draghi, monetary financing, nominal GDP, QE

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