EDPE: A historical review of fiscal-monetary coordination
Published: 29 November 2021
12 January. Mr Frank van Lerven, New Economics Foundation
Mr Frank van Lerven, New Economics Foundation
'A historical review of fiscal-monetary coordination to support economic growth in the 20th century'
Wednesday 12 January, 3pm - 4pm
Zoom online seminar
Abstract
In the face of the perceived high public and private debt levels and sluggish recovery that has followed the financial crisis of 2007-08, and more recently the Covid crisis, there have been calls for greater fiscal-monetary coordination to stimulate nominal demand. Policy debates have been focused upon the inflationary expectations that may be generated by monetary financing or related policies, consistent with New Consensus Macroeconomics theoretical frameworks. Historical examples of fiscal-monetary policy coordination have been largely neglected, along with alternative theoretical views, such as post-Keynesian perspectives that emphasise uncertainty and demand rather than rational expectations. This seminar begins to address this omission. First, we provide an overview of the holdings of government debt by both central banks and commercial banks as an imperfect but still informative proxy for fiscal-monetary coordination in advanced economies in the 20th century. Second, we develop a new typology of forms of fiscal-monetary coordination that includes both direct and less direct forms of monetary financing, illustrating this with case-study examples. In particular, we focus on the 1930s-1970s period when central banks and ministries of finance cooperated closely, with less independence accorded to monetary policy and greater weight attached to fiscal policy. We find a number of cases where fiscal-monetary coordination proved useful in stimulating economic growth, supporting industrial policy objectives and managing public debt without excessive inflation.
Biography
Frank is a Senior Economist for the UK think tank the 'New Economics Foundation' (NEF). His work has been published in the Journal of Ecological Economics, Socio-Economic Review, Cambridge Journal of Economics, and the Review of European Economic Policy. Before joining NEF, Frank worked at the United Nations Development Programme (UNDP) and then went on to help start-up two prominent European think tanks aimed at reforming monetary and fiscal policy.
Further information: business-school-research@glasgow.ac.uk
First published: 29 November 2021
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