Política Monetária em Estado de Guerra

Abstract

The present work intends to briefly review and update the framework for monetary policy drawn up in our «On Monetary Financing» (‘Sobre o Financiamento Monetário’) in light of the interplay between recent theoretical contributions to Monetary Theory and European Integration and the current volatile political events, marked by increasing and indiscriminate state-sanctioned violence against civilians, attacks on energy infrastructure and blockades of critical chokepoints, which increasingly threaten to fracture the Post-World War Order and accelerate the decline of (physical) globalization, plunging supply chains with it.

Drawing on asset price inflation and Europe’s competitive decline, it addresses the question whether restrictive monetary policy is proportionate during an energy induced-supply-side shock. It contends that monetary policy is not the appropriate domain for addressing this type of inflationary shock, as restrictive measures do not exercise a direct effect on underlying supply constraints, even if they remain warranted in light of broader monetary and financial conditions, while arguing accommodative policies are themselves disproportionate and compromise price stability. It therefore advocates for targeted fiscal policies directed to the energy and industrial sector, based on an industrial paradigm for European competition policy.