David Dodge, former Governor of the Bank of Canada, presented his views on the appropriate balance of monetary and fiscal policies for a slow-growth global economy on December 2nd at a C.D. Howe Institute luncheon. In his remarks, entitled “The Role of Macro-Economic Policies in an Era of Global Economic Stagnation,” Dodge noted: “We are stuck in a low-growth global economy characterized by excess supply and low inflation, a low natural interest rate, low productivity growth, and current account imbalances.”
What to do?
Dodge concluded: “At the present time, both price and financial stability would be better served by somewhat higher policy interest rates – rates that would not imply a sacrifice of employment and growth if – and this is a big if – fiscal policy were more expansionary.”
