Monetary Policy Will Never Be the Same


WEOBy Olivier Blanchard

(Version in Español)

Two weeks ago, the IMF organized a major research conference, in honor of Stanley Fischer, on lessons from the crisis. Here is my take.   I shall focus on what I see as the lessons for monetary policy, but before I do this, let me mention two other important conclusions.

One, having your macro house in order pays off when there is an (external) crisis.  In contrast to previous episodes, wise fiscal policy before this crisis gave emerging market countries the room to pursue countercyclical fiscal policies during the crisis, and this made a substantial difference.

Second, after a financial crisis, it is essential to rapidly clean up and recapitalize the banks. This did not happen in Japan in the 1990s, and was costly.  But it did happen in the US in this crisis, and it helped the recovery.

Now let me now turn to monetary policy, and touch on three issues: the implications of the liquidity trap, the provision of liquidity, and the management of capital flows.

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The IMF Annual Research Conference: Economics of Crises―Past Experiences and Present Travails


2010 WEO BLANCHARD By Olivier Blanchard

Several years out from the global financial crisis, the world economy is still confronting its painful legacies. Many countries are suffering from lackluster recoveries coupled with high and persistent unemployment. Policymakers are tackling the costs stemming from the crisis, managing the transition from crisis-era policies, and trying to adapt to the associated cross-border spillovers.

Against this background, the IMF’s 14th Jacques Polak Annual Research Conference, entitled  “Crises: Yesterday and Today,”  to take place on November 7-8, will take stock of our understanding of past and present crises.

This year’s conference will be a special one as we shall honor Stanley Fischer’s many contributions to economic research and policy. Stan has extensively studied economic and financial crises, first as a faculty member at the Massachusetts Institute of Technology, and then as a policymaker with many hats over the years―the Chief Economist of the World Bank, the First Deputy Managing Director of the IMF, and the Governor of the Bank of Israel.

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Central Banks, Financial Regulators, and the Quest for Financial Stability: 2011 IMF Annual Research Conference


By Olivier Blanchard

The global financial crisis gave economists pause for thought about what should be the future of macroeconomic policy. We have devoted much of our thinking to this issue these past three years, including how the many policy instruments work together.

The interactions between monetary and macroprudential policies, in particular, remain hotly debated. And this year’s IMF Annual Research Conference is an important opportunity to take that debate another step forward.

Looking back, it is striking how many papers from last year’s conference—on post-crisis macroeconomic and financial policies—have been so immediately relevant to events on the ground. Just to give you an example: the paper on fiscal space is obviously front and center in the policy debate on the European sovereign crisis, the United States’ budget, and challenges faced by advanced country governments more generally.

This year’s topic—monetary and macroprudential policies—is equally relevant. It goes to the core of central banks’ mandates, and their role in achieving macroeconomic and financial stability. The financial crisis triggered a fundamental rethinking of these issues, but much research, both conceptual and empirical, remains to be done. The conference provides an excellent opportunity to engage with prominent academics, policymakers and private sector practitioners. I hope the conference will contribute to expanding the frontier of knowledge on this topic. Continue reading

Exploring Economic Policy Frontiers After the Crisis: 2010 IMF Research Conference


By Olivier Blanchard

The crisis has forced economists and policymakers to go back to their drawing boards. Where did they go wrong, and what implications does the crisis have for both macroeconomic theory and macroeconomic policy making?

This was the topic of this year’s IMF Jacques Polak Research Conference. The conference was the first since the passing of Jacques Polak, after whom the conference has been named, and to which he came every year until last year. Present at the Fund’s creation and a long time Fund economist, Jacques had been described by the Managing Director as “a leader of critical thought during the post-war evolution of the global economy.” As such, this conference, and its focus on the post-crisis evolution of the global economy, was fitting a fitting tribute to Jacques. We shall miss him.

Post-crisis policymaking

The twelve papers presented at the conference provided rich fodder for discussion. For two days, researchers and policymakers explored the contours of policy making in the post-crisis world. I want to share with you some of the major themes: Continue reading

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