Adapting to Expectations
Adapting to Expectations
This chapter considers the possible application of academic research to address the dire predicament of balance sheet recession and chronic stagnation characterizing large parts of the world economy since 2007. Contemporary policymakers have striven to stimulate demand despite huge debt overhangs and without undermining confidence in the future value of money or sustainability of the public finances and debt. However, as the analysis in the book has shown, excess public debt is fraught with future inflation risk. It highlights two characteristics underlying the best thinking about inflation: adaptation and remembering. It then addresses the question of how inflation targeting might be usefully applied to the post-2007 problems of recession and stagnation against a background of excessive indebtedness.
Keywords: inflation, monetary policy, fiscal policy, recession, world economy, public debt
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