Macro Musings with David Beckworth cover image

Scott Sumner on the Princeton School of Macroeconomics and Overcoming Inflationary Fears

Macro Musings with David Beckworth

CHAPTER

Redefining the Liquidity Trap Theory

The chapter delves into Krugman's influential 1998 paper on the liquidity trap, exploring the challenges of deflation and the role of central banks in fiscal policy. It discusses the evolution of Krugman's views towards fiscal policy and the effectiveness of QE, especially in the context of Japan's economy. The conversation also examines the ideas of permanent monetary base expansion and the implications for future monetary policies.

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