Germany Versus the ECB
With the German economy close to recession, European Central Bank President Mario Draghi has rightly urged eurozone governments to provide more fiscal stimulus. And acknowledging the interaction between fiscal and monetary policy would leave critics much less room for ECB-bashing, argues Hans-Helmut Kotz in recent piece in Project Syndicate. "In influencing economic activity, fiscal and monetary policy interact inexorably. Their joint impact is mediated through what the great economist James Tobin called a “common funnel”. In the eurozone, however, the policy debate regularly ignores this interaction between one monetary policy and 19 fiscal policies. Acknowledging it, however, would leave critics with much less room for ECB-bashing."
