Fiscal stabilisation policy is redundant, says Bullard

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Stabilisation policies should be left to the monetary authority, and not government, as there are considerable doubts over the merits of fiscal stabilisation programmes, according to a paper published by James Bullard, the president of the St Louis Federal Reserve, on January 13.

Bullard uses a new-Keynesian dynamic stochastic general equilibrium model to examine whether fiscal policy is an effective stabilisation tool. He notes that the conventional wisdom pre-2007 was that fiscal policy

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