Balance sheet recession as the â€˜other halfâ€™ of macroeconomics
AbstractOnce every several decades, the private sector loses its mind in a bubble, leverages itself up to the hilt, and is forced into debt minimization in order to remove its debt overhang following the crash. When the private sector as a whole is deleveraging, even at record low interest rates, monetary policy is largely ineffective while fiscal policy becomes absolutely essential in keeping both the economy and money supply from shrinking. The superior effectiveness of monetary policy during private sector profit maximization and of fiscal policy during private sector debt minimization indicates that the latter was the long-overlooked â€˜other halfâ€™ of macroeconomics.
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Bibliographic InfoArticle provided by Edward Elgar in its journal European Journal of Economics and Economic Policies: Intervention.
Volume (Year): 10 (2013)
Issue (Month): 2 ()
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Web page: http://www.elgaronline.com/ejeep
â€˜other halfâ€™ of macroeconomics; Yin and Yang economic cycles; micro-foundation of macroeconomics; unborrowed savings; dual problem of economics; debt minimization; balance sheet recession;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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