Towards a New Paradigm: The Inflation Shock as a Catalyst?

Jerome Creel, Francois Geerolf, Sandrine Levasseur, Xavier Ragot and Francesco Saraceno

No 4, Working Papers from Forum New Economy

Abstract: During the recent inflation episode, the paradigm of separated objectives for monetary and fiscal policies has shown some limits. Fiscal policies have helped mitigate inflation. We advocate for the emergence of a new paradigm that gives equal consideration to fiscal and monetary policies and their interactions. These interactions and their respective spillover effects demand better political coordination and a good dose of pragmatism, in contrast with the binding rules embedded in the separation paradigm so present in the European governance framework. The latter should give more leeway to supply-driven fiscal policies and learn from the US experience.

Keywords: fiscal policy; monetary policy; inflation; Tinbergen; coordination (search for similar items in EconPapers)
JEL-codes: E50 E60 H12 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2024-04
New Economics Papers: this item is included in nep-cba and nep-mon
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