Sorting Out Monetary and Fiscal Policies
Mickey D. Levy testifies before the Subcommittee on Monetary Policy and Trade of the Committee on Financial Services.
Both monetary and fiscal policies have gone off-course. Excessively easy monetary policy, marked by a massive increase in the Federal Reserve’s balance sheet and sustained negative real interest rates, has failed to stimulate faster economic growth, but has distorted financial behavior and involves sizeable risks.
Fiscal policies have resulted in an unhealthy rise in government debt, and projections of dramatic further increases involve incalculable risks. Monetary and fiscal policies interact in undesirable ways. The Fed’s expanded scope of monetary policy has blurred the boundaries with fiscal and credit policies, and the ever-growing government debt may eventually impinge on the Fed and its independence.
Read the full testimony here:
SortingOutMonetaryAndFiscalPolicies.pdf
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