A return to Reaganomics?4 min read 15 Nov 2016, 03:32 AM IST
There is a real prospect that Donald Trump will return to a suitably modified version of the Mundell-Laffer policy mix
Could the election of Donald Trump to the US presidency presage a return to the Mundell-Laffer policy mix? Known variously as “Reaganomics" or “supply side economics", economists Robert Mundell and Arthur Laffer, starting in the early 1970s, advocated what at the time was considered a highly unorthodox mixture of policies. These comprised sound monetary policy—which at the time implied tighter rather than looser money—to combat inflation and achieve external balance; fiscal policy, principally in the form of tax cuts, both to provide a demand side boost and to expand long run or potential output on the supply side; and regulatory reform, intended to boost productivity and, therefore, medium- to long-run prospects for economic growth.