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Income Distribution and Borrowing: Growth and Financial Balances in the US Economy

Gennaro Zezza

Chapter 5 in The Financial Crisis, 2011, pp 87-113 from Palgrave Macmillan

Abstract: Abstract According to the more widespread interpretations of the economic and financial crisis which started in 2007, its origin is either due to an exogenous shock which could occur with low probability, or to some kind of misbehaviour in the conduct of monetary policy, or to the misbehaviour of unregulated financial markets. Accordingly, the problems which generated the crisis can be fixed in the medium term by a more stringent regulation of those segments of financial markets which misbehaved, and by a return to the Taylor rule for managing monetary policy. All measures which have been undertaken to sustain the economy in the short run, such as injections of liquidity in financial markets and fiscal expansion, are seen as potentially harmful in the medium term, requiring — sooner rather than later — a change in policy to eliminate the threat of inflation and to reduce public debt.

Keywords: Interest Rate; Monetary Policy; Financial Crisis; Housing Market; Real Interest Rate (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-30394-2_5

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DOI: 10.1057/9780230303942_5

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