GRANVILLE, Ohio – Giuseppe Mastromatteo (Professor of Economics, Catholic University of Milan, Italy) and Lorenzo Esposito (Bank of Italy, Milan), Research Scholars at the Binzagr Institute, have co-authored a new policy note titled “Rethinking Economic Policy in the Age of Financialization: Why the Barro-Ricardo Theory cannot Make Sense” (Policy Note No. 116, September 2017), which is also available with an Italian translation as “Ripensare la teoria economica nell’era della finanziarizzazione: perchè l’equivalenza ricardiana non funziona.”
“We are very excited to publish this policy note both in English and Italian,” said Fadhel Kaboub, President of the Binzagr Institute. “We have a number of forthcoming publications that will appear in English, French, Arabic, Spanish, and possibly other languages. We are trying to leverage the linguistic capital of our research team to reach a broader audience across the world,” he added.
In this policy note, Research Scholars Mastromatteo and Esposito argue that the Barro-Ricardo equivalence (BRE) theory can no longer be applied to contemporary debates about the impact of financialization on fiscal policy. Specifically, the analysis looks at the 2008 financial crisis and how the BRE model shaped economic policies leading up to the crash. Mastromatteo and Esposito summarize this process as follows:
“While policy conclusions of the BRE were a warning against public debt and public deficit, the fact that the weight of the financial system on world economy was growing apace, does not appear to have been of any concern. The conclusion was that although the 2008 crisis was not an out of the blue event but came after many other less important crises, BRE-based economics were not able to detect the extent to which the recession would affect long lasting trends linked to finance.”
A brief promotional video for this policy note is available on the Binzagr Institute’s YouTube channel.
The Binzagr Institute for Sustainable Prosperity is an independent public policy think-tank dedicated to the promotion of interdisciplinary research in the service of an improved quality of life for all members of society. The institute provides alternative public policy solutions that address a wide range of socio-economic problems faced by the global community. If you would like more information on the institute’s policy notes or other publications, please call 740-587-6315 or send an email to [email protected].