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Some Like the Economy Hot: Or, Reviving the Monetarist/Keynesian Debate

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  • Hetzel, Robert

    (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise)

Abstract

In 2017 and early 2018, inflation regularly fell below the FOMC's two-percent inflation target. To raise inflation, the FOMC pursued a policy of allowing growth to run above potential to create a positive output gap. A positive output gap would, it was assumed, create wage inflation, which would pass through to price inflation. This policy possessed the hallmarks of the activist policy of the 1970s. The question then arises of whether it will produce the same destabilizing go-stop cycle.

Suggested Citation

  • Hetzel, Robert, 2018. "Some Like the Economy Hot: Or, Reviving the Monetarist/Keynesian Debate," Studies in Applied Economics 110, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    • Handle: RePEc:ris:jhisae:0110
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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