Alan S. Blinder on Monetary and Fiscal Policy: Rowing with Both Oars
IMF Podcasts
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Clash Between Monetary and Fiscal Policy in the 1980s
The clash between monetary and fiscal policy in the early 1980s was significant, with Volcker tightening monetary policy against inflation while Reagan implemented pro-inflationary tax cuts based on supply-side ideology. This clash resulted in a short slump in 1980 and a longer one in 1981-1982 in the U.S. economy. However, as Volcker eased up on inflation and Reagan's tax cuts took effect, the economy experienced a boom leading to Ronald Reagan's landslide re-election.
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