Conclusions

The approach adopted in this book aims at making the reader aware that a lot can be learned about economic policy from history (Blanchard & Summers, 2017).

After the Great Depression of the 1930s, the Keynesian theory told us that the economic system is not self-stabilizing, that the aggregate demand is central, and that economic policy, especially fiscal policy, has a central role in granting stability and growth.

At the opposite, the stagflation of the 1970s revealed the incompleteness of the Keynesian approach and its inability to tackle with an evolving world in which the financial system covered an ever-increasing role. The economic system fluctuations were interpreted as the result of business cycles, which can be easily avoided through the implementation of policy, both monetary and fiscal, rules. Inflation targeting and public debt and deficit thresholds would have assured a stable environment to minimize fluctuations and grant long-run stable growth.