Supply Side Keynesianism

The argument made in this manuscript is that the two traditional macroeconomic tools, fiscal policy and monetary policy, are insufficient to bring back efficiently into equilibrium an economy that has had a major crisis. Both traditional macro-tools only work through the demand side, and there is no macro-tool at hand to influence the supply side. QE could be understood, in principle, as a new tool that works through the supply side – by providing credit; but it was only used substantially for mortgages both in the 2008 GFC and in the 2020 GP. In this document, it is proposed that QE should be extended to provide credit to the whole productive economy – which will provide policy makers with a new macro-tool capable to stimulate the supply side of the economy in the short term. The new macro-tool proposed does not pretend to substitute the demand side adjustments required using fiscal and monetary policies; but to complement them with a new macro-tool that fosters the rapid recovery of the supply side. Using this new macro-tool will reduce to the minimum possible the demand-supply imbalance that generate unacceptable levels of inflation.