Summers and the road to Damascus

By Jerri-Lynn Scofield

“In what constitutes a volte-face, Lawrence Summers openly admits that monetary policy is ineffective in the current environment of secular stagnation and argues that what is needed instead are “efforts by governments to promote demand through fiscal policies and other means.” Summers and co-author Anna Stansbury write that they have come to agree with “the point long stressed by writers in the post-Keynesian (or, perhaps more accurately, original Keynesian) tradition: the role of particular frictions and rigidities in underpinning economic fluctuations should be de-emphasized relative to a more fundamental lack of aggregate demand.”…

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