Keynes’ original intention in introducing the concept of a liquidity trap was to explain the reason why persistent large amounts of unutilized resources were generated during the Great Depression. This paper shows that this type of phenomenon cannot be explained in the framework of a...

In late 2008 and early 2009, there has been a serious deterioration in the economic outlook of political leaders, the media and many economic analysts. Comparisons of recent performance and the outlook have degenerated into comparisons with the Great Depression of the 1930s, suggesting that the...

In October 2008 the main Hungarian public finance actors: the government, the National Bank of Hungary (MNB) and experts cited the high public debt and volume of unsecured foreign-currency loans as the main reasons for the economy’s vulnerability. On the other hand according to the formal...

This paper explores three areas in which the experience of the Great Depression might be relevant today: monetary policy, fiscal policy and the systemic stability of the banking system. We confirm the consensus on monetary policy: deflation must be avoided. With regard to fiscal policy, the...

The welfare state was created after 1950 with counterproductive mechanisms and this caused high inflation and high unemployment and stagnating growth by 1970, called stagflation. Since 1970 governments redressed the welfare state but did not succeed in finding workable mechanisms. They rather...

Many researchers have explored the implications of Lucas’ misperception model. Arguably, the most important implication of this model is that the slope of the aggregate supply curve depends on the variability of nominal shocks. This paper examines this insight from Lucas’ model using annual...

Agency-based explanations of the great deprivation, contrasted with structure-based explanations, suffer not merely from the criticism of relying on irrational and irresponsible behavior of millions, including that of the most astute financial experts, but are also at a loss to explain why such...

An analysis of the impact from stabilizing instruments important to macroeconomic policy on output in the US is presented. A simple approach to identify the influence of macroeconomic-policy instruments, based on the St. Louis equation, is clearly presented and examined using annual US data from...

This paper surveys evidence on fiscal multipliers from the Euro area and the United States obtained by direct, cross-state or economywide measures of the effects of broad-based tax cuts and increases in government purchases. In view of the evidence in the literature I conclude that that fiscal...

This paper analyses the issue of the dynamics of the TARGET2 system balances during the sovereign debt crisis. The development of these balances reflects the change in the distribution of the monetary base among the EMU Member States. During the sovereign debt crisis, while some countries, among...