For this new episode of the interview series conducted within the Chair “Mutual and Cooperative Banking for the Benefit of the Economy”, in partnership with BPCE, Olivier Blanchard shares key ideas shaped over a lifetime devoted to understanding macroeconomic dynamics.
Blanchard describes himself as a new-Keynesian, advocating a monetary policy guided by a clear inflation target and a fiscal policy that actively supports aggregate demand. He argues that public debt should be stabilized, as long as economic conditions remain stable.
The discussion is structured around three essential themes:
- The endurance of Keynesian thinking.
- While acknowledging insights brought by new classical macroeconomics in the 1980s, Blanchard emphasizes that real-world crises have consistently reaffirmed the importance of fiscal intervention.
- Credibility in monetary policy.
He notes that the effectiveness of central banks depends on the predictability of their actions. Although he once argued for raising the inflation target from 2% to 4%, he now recognizes that maintaining the 2% target helped reinforce central bank credibility.
Despite imperfections, Blanchard considers European integration a success, particularly for countries that emerged from centrally planned economies. Moving forward, he calls for stronger integration, not by replicating the U.S. model, but by implementing the recommendations of the Draghi and Letta reports.
This interview offers a nuanced perspective on how macroeconomic theory continues to evolve in response to global challenges.
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