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The Right Advice for the Pandemic Recovery

As long as there is no major uptick in inflation, central banks would do well to sustain their expansionary monetary policy, but with the goal of supporting effective – and coordinated – fiscal-policy interventions. In other words, the world needs to follow the late Richard Cooper's sound counsel.

NEW HAVEN – Last year, I lost my teacher, friend, and most valued research colleague, and the world lost a brilliant economist. Richard Cooper was one of my supervisors when I was pursuing my Ph.D. at Yale. As a doctoral candidate, I benefited from a veritable “dream team” of economists, each of whom enriched my life and work tremendously. James Tobin pushed me toward deep and creative insights with empirical relevance. Edmund Phelps sharpened my analytical skills. And Cooper made sure that I applied my ideas to policymaking, so that they would have a real-world impact. For that, I will be forever grateful.

Cooper led by example: his work examined the interdependence of countries’ economic policies. He developed his ideas mainly within the Keynesian framework, in which fiscal policy is the primary policy tool, and showed how carefully planned international coordination of fiscal policies would improve outcomes for everyone.

Notably, Cooper developed the “locomotive theory,” according to which the United States, Germany, and Japan – the three “locomotives” – would “pull” the global economic train to safety following a recession in the 1970s. The theory was put into practice at the G7 summit in 1978.

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