Hanno Lustig on Fiscal Dominance, Inflation, and the Effects of Long-term Interest Rate Decline
Macro Musings with David Beckworth
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Is the ECB Really Doing Fiscal Policy?
The e c b does not have a mandate to engage, directly or indirectly, in fiscal policy. They actually have a very narrow mandate to pursue price stability. The other challenge i see is that it's hard to see how a central banker in real time would be able to sort out what part of the variation in supress can be attributed to fundamentals and what part cannot. If you are perceived to be providing a back stop for fiscal policy makers, you may inadvertently give more power to populists who don't behave responsibly. I think we've seen an example of that recently in italy, where populis forces have actually forced the drage government to fail, and drage was forced to
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