Monday, January 26, 2015
Those Radical VSPs
New York Times
January 26, 2015
As we head for the big Greek face-off, Francesco Saraceno makes a point I’ve also made on a number of occasions: although many of the press reports describe Syriza as “far-left”, it’s actually preaching fairly conventional economics, while the supposedly responsible officials of Brussels and Berlin have been relying on radical doctrines like expansionary austerity and a growth cliff at 90 percent. The same has to a certain extent been true in the US context.
Once again: textbook macroeconomics says that focusing on deficit reduction in a depressed economy, where the zero lower bound constrains the effectiveness of monetary policy, is a very bad idea. And although nobody will believe it, textbook macro has actually been a very good guide to the economy since the financial crisis, as Jared Bernstein also emphasizes.