There has been a fundamental rethink of fiscal and monetary policy in an economic environment of simultaneously high debt and low interest rates. The current inflationary period does not change those fundamentals. Olivier Blanchard will discuss his forthcoming book, Fiscal Policy under Low Interest Rates, which sets out fully the analytical argument and practical policy implications of this rethinking. In short, low rates imply lower costs and higher benefits of public debt – not just directly for social welfare, but also for macroeconomic stabilization when low rates decrease the room for monetary policy. Blanchard's conclusions hold practical implications for economic and fiscal policymakers, bankers, and politicians around the world.
A Q&A and discussion with the audience moderated by PIIE president Adam S. Posen will follow.
About the Speaker
Olivier Blanchard is the C. Fred Bergsten Senior Fellow at the Peterson Institute for International Economics and the Robert M. Solow Professor of Economics emeritus at the Massachusetts Institute of Technology (MIT). His rethinking began with his American Economic Association Presidential Address in January 2019, "Public Debt and Low Interest Rates." After obtaining his PhD in economics from MIT in 1977, he taught at Harvard University and returned to MIT in 1982. From 2008 to 2015, he served as economic counsellor and director of the research department at the International Monetary Fund, when he then joined the Peterson Institute. He is a past editor of the Quarterly Journal of Economics and the NBER Macroeconomics Annual and founding editor of American Economic Journal: Macroeconomics.