Reaganomics

The scars of supply shocks: Implications for monetary policy

“…Interestingly, there are historical antecedents to our proposed policy mix. In fact, fiscal incentives for firms to invest, especially in R&D, were part of the Volcker-Reagan 1980s disinflation package (Blanchard, 1987;Modigliani, 1988). Recent evidence suggests that these fiscal incentives boosted innovation activities and productivity growth in the United…”

“…A successful disinflation can thus be seen as the outcome of both active supply and demand side management: while monetary policy slows inflation by reducing aggregate demand, fiscal policy slows inflation by supporting aggregate supply. 4 Interestingly, a similar policy mix characterized the 1980s disinflation in the United States, during which a sharp monetary tightening was accompanied by subsidies to business investment, especially in R&D (Blanchard, 1987;Modigliani, 1988). This paper is related mainly to two strands of the literature.…”

The Arc of Neoliberalism

“…But neoliberalism was not just about financial stability. By the late 1970s, there were already quiet and modest moves toward market liberalization, which accelerated quickly during the 1980s (Albo 2002, Blanchard et al 1987, Bray & Walsh 1998, Harvey 2005, Healey 1992). Deregulation, particularly in the financial sector, represented an even earlier area of major reform.…”

Welfare implications of the transition to high household debt

“…(pp. 301) Similarly, Blanchard (1987) By the end of 1982, budget deficits had become the dominant macroeconomic force. Large deficits were strongly increasing aggregate demand and putting pressure on interest rates.…”