Elga discusses the challenges facing central bankers when the next downturn comes – and makes some unprecedented policy suggestions. This is the first in a series of four blogs on the topic of “Dealing with the next downturn.” Unprecedented policies will be needed to respond to the next economic downturn. Monetary policy is almost exhausted as global interest rates plunge toward zero or below. Inflation expectations are dragging on actual inflation. See the chart below. Fiscal policy on its own will struggle to provide major stimulus in a timely fashion given high debt levels and the typical lags with implementation. ... (full story)