According to Zhang Tao, CF40 Youth Forum Member, before adopting the monetization of fiscal #deficit as a real policy option, three critical questions need to be answered:
1. What economic grounds justify deficit monetization? The basis for any macroeconomic policy package is economic reality—prior to the discussion of a policy option, actual economic operation must be evaluated.
2. Is it worth to sacrifice the coordination between fiscal and monetary policies? Better coordination between fiscal and monetary policies usually means better effect of macro control. Deficit monetization could undermine this coordination.
3. How to deal with the impact of sovereign credit on monetary policy as a result of deficit monetization that will cause excessive government #debt? This question arises from the de facto relaxation of constraint on fiscal deficit due to the adoption of deficit monetization.
Once such kind of “soft” constraint gets normalized, the increase of government debt may also become normal; as a result, monetary policy will inevitably get impacted by sovereign #credit.
mp.weixin.qq.com/s/6fBE0QMiwDJC…
Share this Scrolly Tale with your friends.
A Scrolly Tale is a new way to read Twitter threads with a more visually immersive experience.
Discover more beautiful Scrolly Tales like this.