Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/277414 
Year of Publication: 
2018
Citation: 
[Journal:] European Journal of Economics and Economic Policies: Intervention (EJEEP) [ISSN:] 2052-7772 [Volume:] 15 [Issue:] 2 [Year:] 2018 [Pages:] 132-138
Publisher: 
Edward Elgar Publishing, Cheltenham
Abstract: 
We revisit the theoretical underpinnings of the monetary policy consensus before the Great Recession. We highlight how they resulted from New Keynesian dynamic stochastic general equilibrium (DSGE) models that (i) neglected the actual process of coordination in markets, (ii) saw price rigidity as an obstacle to the correct functioning of markets, and (iii) overlooked the effects of finance on the determination of credit supply. Furthermore, we outline some elements of an alternative framework conceiving the output-inflation dynamics as the result of coordination efforts in markets that are constantly in disequilibrium. We discuss how such a disequilibrium perspective leads to opposite conclusions with respect to DSGE models about the role of price rigidity and of fiscal and monetary policy interactions, and about the process of endogenous money formation and credit supply. Finally, in such a perspective, quantitative easing policies may play a key role also in normal times as key determinants of the distribution of financial risk.
Subjects: 
output-inflation dynamics
New Keynesian models
disequilibrium analysis
monetary-fiscal policy interactions
quantitative easing policies
JEL: 
E31
E32
E5
E61
E62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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