Krugman vs. Rajan on the Causes of and Responses to US Economic Stagnation

Paul Krugman rejects the claims that Raghuram Rajan makes about why the US entered the financial crisis.  Furthermore he argues that the cause is not particularly important and that more macroeconomic policy stimulus is needed until the US returns to pre-recession levels of employment and GDP.  Rajan argues that such stimulus is partly the reason why the crisis was created and that fundamental reform is required.

Cafe Hayek provides links to both articles in a recent posting.

Raghuram Rajan responds to criticism from Krugman and Wells. Much of his response will be familiar to Cafe Hayek readers but it is convenient to have all of Krugman’s mistakes about the housing bubble assembled in one place.