There's More to QE Than Krugman Thinks

The debates about the effect quantitative easing has on inflation aren't as settled as Nobel economist Paul Krugman would make them out to be.

Sometimes things don't work how you think they should.

Photographer: Nicholas Kamm/AFP/Getty Images

Nobel Prize-winning economist Paul Krugman says that quantitative easing was a test of macroeconomic theories. On one side, he says, Keynesian theories predicted that QE would have little effect; on the other side, a whole bunch of alternative schools predicted that there would be high  inflation. According to Krugman, the failure of inflation to materialize means that Keynesians prevailed, and this makes sense -- the theories that predicted inflation seem to be due for a re-examination, especially in light of Japan’s very similar experience in previous decades.

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