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Towards a New Paradigm: The Inflation Shock as a Catalyst?

Author

Listed:
  • Jerome Creel

    (OFCE)

  • Francois Geerolf
  • Sandrine Levasseur
  • Xavier Ragot
  • Francesco Saraceno

Abstract

During the recent inflation episode, the paradigm of separated objectives for monetary and fiscal policies has shown some limits. Fiscal policies have helped mitigate inflation. We advocate for the emergence of a new paradigm that gives equal consideration to fiscal and monetary policies and their interactions. These interactions and their respective spillover effects demand better political coordination and a good dose of pragmatism, in contrast with the binding rules embedded in the separation paradigm so present in the European governance framework. The latter should give more leeway to supply-driven fiscal policies and learn from the US experience.

Suggested Citation

  • Jerome Creel & Francois Geerolf & Sandrine Levasseur & Xavier Ragot & Francesco Saraceno, 2024. "Towards a New Paradigm: The Inflation Shock as a Catalyst?," Working Papers 4, Forum New Economy.
    • Handle: RePEc:agz:wpaper:2404
    as

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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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