This Policy Brief reassesses macroeconomic policies in the current environment of low growth and low interest rates in major advanced economies. Despite low rates, demand remains anemic. The scope for monetary policy, which has carried much of the burden to stimulate demand, is increasingly limited. But there is plenty of room for fiscal policy to increase output, and it should be explored more aggressively. On specific economies, there is a strong case for higher inflation in the United States, the eurozone, and Japan, but for different reasons: In the United States, as insurance against the next recession; in the eurozone, to allow periphery countries to improve competitiveness without deflation; and in Japan, to reduce the burden of debt.
