ECB paper sees merits in fiscal activism at ZLB
Research examines what fiscal policy is best at zero lower bound
It may be socially desirable to appoint a "fiscally activist" policy-maker who values stabilising inflation more – relative to stabilising government spending – than the private sector does, according to new research published today by the European Central Bank (ECB).
The working paper, Fiscal activism and the zero nominal interest rate bound, says the zero lower bound "can be a severe drag on conventional monetary stabilisation policy".
The author, Sebastian Schmidt, acknowledges that in this
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