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Income Distribution and Borrowing: Growth and Financial Balances in the US Economy

In: The Financial Crisis

Author

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  • Gennaro Zezza

Abstract

According to the more widespread interpretations of the economic and financial crisis which started in 2007, its origin is either due to an exogenous shock which could occur with low probability, or to some kind of misbehaviour in the conduct of monetary policy, or to the misbehaviour of unregulated financial markets. Accordingly, the problems which generated the crisis can be fixed in the medium term by a more stringent regulation of those segments of financial markets which misbehaved, and by a return to the Taylor rule for managing monetary policy. All measures which have been undertaken to sustain the economy in the short run, such as injections of liquidity in financial markets and fiscal expansion, are seen as potentially harmful in the medium term, requiring — sooner rather than later — a change in policy to eliminate the threat of inflation and to reduce public debt.

Suggested Citation

  • Gennaro Zezza, 2011. "Income Distribution and Borrowing: Growth and Financial Balances in the US Economy," Palgrave Macmillan Books, in: Philip Arestis & Rogério Sobreira & José Luis Oreiro (ed.), The Financial Crisis, chapter 5, pages 87-113, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-30394-2_5
    DOI: 10.1057/9780230303942_5
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    Cited by:

    1. Dimitri B. Papadimitriou & Michalis Nikiforos & Gennaro Zezza & Greg Hannsgen, 2014. "Is Rising Inequality a Hindrance to the US Economic Recovery?," Economics Strategic Analysis Archive sa_apr_14, Levy Economics Institute.

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