Fiscal and monetary policy in crisis

The Global Financial Crisis and ongoing Eurozone crisis have posed a growing challenge to the implementation of mainstream macroeconomic stabilisation policies. This thesis develops an integrated and coherent theoretical and empirical framework for understanding the constraints on the post-crisis conduct of fiscal and monetary policy among Eurozone and advanced non-Eurozone economies. It is presented as a series of published and submitted research articles which are informed by the principles of Modern Monetary Theory. The central contribution of the thesis is to highlight the policy freedoms of economies which enjoy full fiscal-monetary policy sovereignty. The implications are, first, government within sovereign economies are not adequately exploiting their inherent financial capacity to implement a full employment policy and advance the public purpose. Second, economies which do not enjoy policy sovereignty, such as Eurozone members, face a unique set of institutional constraints which have undermined not only policymakers’ attempts to address the deepening crisis, but the achievement of sustained full employment. The thesis is highly critical of these institutional arrangements and recommends that policy sovereignty is restored since it promotes flexibility in the design and implementation of fiscal and monetary policy, and eliminates the financial constraints vis-à-vis implementing a full employment policy, such as a Job Guarantee.