- Tuesday 5 Mar 2019, 13:00 - 14:45
Erasmus University Rotterdam, Campus Woudestein, Theil Building, room C1-1
"In a nutshell, the book argues that we’ve pushed monetary policy as a tool of macro policy at the zero lower bound as far as we should go from a legal/institutional perspective (and explains why). I argue that this proposition binds especially strongly in the Eurozone, where the Lisbon Treaty and subsequent statutes limit the powers of the ECB much more than the typical central bank enabling statute."
The book then proposes alternative stimulus tools. The book reviews automatic fiscal policy and makes many recommendations for improving automatic fiscal policy as an automatic stabilizer. I show that we can do a lot to make fiscal policy more effective in demand management without requiring legislatures to be particularly responsive to the business cycle. For example, I show that income tax withholding rules can be used as a tool of demand management. I also discuss why fiscal policy stabilization is particularly difficult in the EU given understandable worries about “fiscal space” in many countries and the absence of a more robust fiscal union.
The most novel part of the book proposes “expansionary legal policy” as a stimulus instrument when both monetary and fiscal policy is lacking. Intuitively, much of law and regulation resembles a hybrid tax and spending program. Just as tax and spending are used to stimulate aggregate demand in recessions, so too could law. For example, lowering utility rates in recessions and raising them in ordinary times would have a stimulus effect equal to the largest tax cuts. And because so much discretion is vested in utility regulators, I argue that they could pursue demand management without violating their enabling statutes.
More generally, the law offers a viable stimulus option for jurisdictions, like Greece, where fiscal and monetary stimulus are foreclosed."