LAUSR.org creates dashboard-style pages of related content for over 1.5 million academic articles. Sign Up to like articles & get recommendations!

Coping with deflation and the liquidity trap in the eurozone: A post Keynesian approach

Photo by goian from unsplash

ABSTRACT The ghost of deflation is once again one of the main worries of policymakers. Recently deflation is indeed characterizing the eurozone. The renewed concern about deflation is due in… Click to show full abstract

ABSTRACT The ghost of deflation is once again one of the main worries of policymakers. Recently deflation is indeed characterizing the eurozone. The renewed concern about deflation is due in part to the historical association of deflationary episodes with financial crises, recession, stagnation, and even depression. In deflationary conditions, nominal interest rates are more volatile because uncertainty increases and they may come close to their lower limit of zero: If a “liquidity trap” is at work, monetary policy is incapable of stimulating aggregate demand. This article seeks to show that to avoid a “Japanization” of the eurozone it is urgent to implement adequate economic policies in accordance with the post Keynesian approach. The European Central Bank in recent times has tried to do its best to save the situation through espansive monetary policies adopting both quantitative and qualitative easing. Unfortunately, these kinds of policies have tended more to prevent the recession from becoming far worse than enabling a significant fight against deflation and promoting economic recovery. Conventional and unconventional approaches in economic policy are investigated with a critical eye and contrasted with the theoretical insights suggested by post Keynesians.

Keywords: eurozone; liquidity trap; post keynesian; post; deflation; keynesian approach

Journal Title: Journal of Post Keynesian Economics
Year Published: 2018

Link to full text (if available)


Share on Social Media:                               Sign Up to like & get
recommendations!

Related content

More Information              News              Social Media              Video              Recommended



                Click one of the above tabs to view related content.