Why Stimulus Has Failed
The world suffers from a shortage of aggregate demand relative to supply, but more monetary and fiscal stimulus has done little to revive growth and employment. That is because years of a debt-fueled boom left behind an economy that supplies too much of the wrong kind of good relative to the changed demand.
NEW DELHI – Two fundamental beliefs have driven economic policy around the world in recent years. The first is that the world suffers from a shortage of aggregate demand relative to supply; the second is that monetary and fiscal stimulus will close the gap.