New challenges for monetary and fiscal policies

As a result of the “Global Financial Crisis” of 2008, the traditional tools of monetary and fiscal policies were broken and cannot be restored. New approaches to formulating and implementing monetary policies have been adopted, but there is no empirically supported evidence of the effectiveness of the new tools. Whether or not there is an acceleration of inflation or a return to deflation, it will neither be a result of central bank actions, nor can such be combated with monetary or fiscal policies. The decade-old debates about reliable targets and indicators of stabilization policies will have to be waged once again before confidence in the effectiveness of new policies and approaches can be restored. © 2019, Japan Economic Policy Association (JEPA).