Thursday, September 20, 2012

The Short Run

I think good monetary policy can go a long way to smoothing out the business cycle, and even easing financial crises in the short run. At the beginning of the 2008-09 financial crisis, I believe the Fed could have done more monetary stimulus than it chose to do. I believe the restraint on that front was due to political constraints. Instead, the government choose to engage in stimulus spending/borrowing. The Bush and Obama administrations both had similar perspectives on this, although the Obama administration was slightly more aggressive on certain fronts (e.g. auto bailouts). On the eve of QE3, though, here is a nice reminder that the short run is short. Really. (HT: MR)

No comments:

Post a Comment