Financing Covid-19, Inflation and the Fiscal Constraint

Bibliographic Data

ID12068232
AuthorsLuiz Carlos Bresser-Pereira (0000-0001-8679-0557, Getulio Vargas Foundation, Sao Paulo, Brazil, corresponding author)
Year2020
Volume49
Issue3
Pages241-256
Publication date2020-07-02
Open AccessNo
TypeARTICLE
VenueForum for Social Economics (JOURNAL)
Journal identifiersISSN: 0736-0932 • E-ISSN: 1874-6381
PublisherTaylor & Francis (PUBLISHER • GB)
DOI10.1080/07360932.2020.1792176
OpenAlexW3043940244
LanguageEN
Citations received2
References cited5

The COVID-19 pandemic is producing an economic depression that, however, could be substantially reduced if the state in each country, besides making the required health spending, compensates the companies and households that are losing with the social distance and lockdown policies. Governments, however, limit their expenditures not to increase the public debt. There is, however, the possibility that central banks buy new securities from the Treasury to finance such exceptional spending. Considering several economic constraints that policymakers face, this policy will not conflict with the inflation constraint. Money is an endogenous variable that does not cause but just validates a going inflation. It conflicts partially with the fiscal constraint, but avoids the increase in the public debt. And, in this case, it does not have the bad consequences of fiscal indiscipline—excess demand that, successively, causes increases in imports and current account deficits that appreciate the national currency, accelerate inflation, and lead to currency crises. Monetary financing of the COVID-19 will not cause any of these three evils

Constraint (computer-aided design · Currency · Debt · Economics · Fiscal policy · Inflation (cosmology · Macroeconomics · Monetary economics · Monetary policy · Treasury · Economic theories and models · Economic Theory and Policy · Monetary Policy and Economic Impact

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