GROWINPRO Andrea Roventini discussed the results of a research aimed at investigating what is the most appropriate combination of fiscal and monetary policies in economies subject to financial crises and deep recessions
GROWINPRO principal investigator Andrea Roventini held a speech on “Fiscal and monetary policies in complex evolving economies” at the conference ‘’What can complexity add to macroeconomic policy making’’, that took place in London at the Social Institute of Economic and Social Research on Thursday, January 30.
The conference, jointly organized by Rebuilding Macroeconomics and the OECD’s New Approaches to Economic Challenges initiative (NAEC), was aimed at finding out what complexity science can add to macroeconomic policymaking beyond traditional macroeconomics.
Andrea Roventini discussed the results of a research aimed at investigating, using an agent-based model, what is the most appropriate combination of fiscal and monetary policies in economies subject to banking crises and deep recessions. Results suggest that the most appropriate policy mix to stabilize the economy requires unconstrained counter-cyclical fiscal policies. Instead, austerity policies always depress the economy in the short-run. Moreover, by stifling innovation the hamper the growth potential in the long-run. Finally, fiscal policies are self-defeating as they worsen public finances. Finally, the research found that expansionary policies are more and more needed as inequality increases. Indeed, the impacts of monetary and fiscal policies are stronger and stronger as the level of income inequality grows.
Participants at the conference included Alan Kirman (chief advisor to the NAEC Initiative), Alex Brazier (executive director for financial stability at the Bank of England), and Arthur Turrell (research economist at the Bank of England).