01136nam a22001457a 4500 521186 521186 221226b ||||| |||| 00| 0 eng d Woodford, Michael 36400 Effective demand failures and the limits of monetary stabilization policy The American Economic Review 112(5), May, 2022: p.1475-1521 The challenge for stabilization policy presented by the COVID-19 pandemic stems above all from disruption of the circular flow of payments, resulting in a failure of what Keynes (1936) calls "effective demand." As a consequence, economic activity in many sectors can be inefficiently low, and interest-rate policy cannot eliminate the distortions—not because of a limit on the extent to which interest rates can be reduced, but because interest-rate reductions fail to stimulate demand of the right sorts. Fiscal transfers are instead well suited to addressing the fundamental problem, and can under certain circumstances achieve a first-best allocation of resources. – Reproduced The American Economic Review MONETARY POLICY AR 0 0 ddc 0 0 395237 IIPA IIPA 2022-12-26 112(5), May, 2022: p.1475-1521 AR127740 2022-12-26 AR