Posted on May 3, 2013 by iMFdirect
Guest post by: Joseph E. Stiglitz
Columbia University, New York, and co-host of the Conference on Rethinking Macro Policy II: First Steps and Early Lessons
(Versions in 中文, Français, 日本語, and Русский)
In analyzing the most recent financial crisis, we can benefit somewhat from the misfortune of recent decades. The approximately 100 crises that have occurred during the last 30 years—as liberalization policies became dominant—have given us a wealth of experience and mountains of data. If we look over a 150 year period, we have an even richer data set.
With a century and half of clear, detailed information on crisis after crisis, the burning question is not How did this happen? but How did we ignore that long history, and think that we had solved the problems with the business cycle? Believing that we had made big economic fluctuations a thing of the past took a remarkable amount of hubris.
Filed under: Advanced Economies, Debt Relief, Economic Crisis, Emerging Markets, Europe, Finance, Financial Crisis, growth, IMF, International Monetary Fund | Tagged: central banks, credit, Economics, Financial regulation, GDP, global economic crisis, IMF, iMFdirect, interest rates, International Monetary Fund, Joseph Stiglitz, monetary policy, reform, stability | 8 Comments »
Posted on May 2, 2011 by iMFdirect
The global financial crisis caused immense hardship and suffering all over the world. To prevent a repeat, we need to rethink…
… what we know about economic theory …. We need to rethink, following this, the policies … coming from the analytical work. And then we will need also to rethink multilateralism.
IMF Managing Director Dominique Strauss-Kahn (April 16, 2011)
A wholesale reexamination of macroeconomic principles in the wake of the crisis was the goal of a conference at the IMF in early March.
But, for Olivier Blanchard and others, the conference was merely “the beginning of a conversation, the beginning of an exploration.”
Here is our list of recommended reads to help you be part of the conversation. Continue reading
Filed under: Economic Crisis, Economic research, International Monetary Fund | Tagged: David Romer, global economic crisis, Joseph Stiglitz, Macro and Growth Policies in the Wake of the Crisis, macroeconomic models, macroeconomic policy, macroeconomists' playbook, Michael Spence | 7 Comments »
Posted on March 22, 2011 by iMFdirect
Guest post by Joseph E. Stiglitz, Columbia University, and
co-host of the Conference on Macro and Growth Policies in the Wake of the Crisis
The most remarkable aspect of the recent conference at the IMF was the broad consensus that the macroeconomic models that had been relied upon in the past and had informed major aspects of monetary and macro-policy had failed. They failed to predict the crisis; standard models even said bubbles couldn’t exist—markets were efficient. Even after the bubble broke, they said the effects would be contained. Even after it was clear that the effects were not “contained,” they provided limited guidance on how the economy should respond. Maintaining low and stable inflation did not ensure real economic stability. The crisis was “man-made.” While in standard models, shocks were exogenous, here, they were endogenous. Continue reading
Filed under: Economic Crisis, Economic research, Financial Crisis, International Monetary Fund | Tagged: capital flows, central banks, credit risk, cross-border linkages, economic recovery, financial markets, financial sector regulation, financial stability, fiscal policy, industrial policy, inflation, Joseph Stiglitz, Macro and Growth Policies in the Wake of the Crisis, macroeconomic models, macroeconomic policy, macroeconomic stability | 15 Comments »
Posted on March 13, 2011 by iMFdirect
By Olivier Blanchard
(Version in Français, Español)
The global economic crisis taught us to question our most cherished beliefs about the way we conduct macroeconomic policy. Earlier I had put forward some ideas to help guide conversations as we reexamine these beliefs. I was heartened by the wide online debate and the excellent discussions at a conference on post-crisis macroeconomic policy here in Washington last week. At the end of the conference, I organized my concluding thoughts around nine points. Let me go through them and see whether you agree or not. Continue reading
Filed under: Economic Crisis, Economic research, Financial Crisis, Financial regulation, Fiscal policy, growth, International Monetary Fund | Tagged: Adair Turner, agency theory, Andrew Sheng, Behavioral economics, capital controls, cross-border linkages, Dani Rodrik, Financial regulation, inflation targeting, Joseph Stiglitz, liquidity, macroeconomic policy, macroprudential regulation, Michael Spence, Olivier Blanchard, Paul Romer, policy instruments, policy targets, Robert Solow, SDRs, Special Drawing Rights, systemic crisis, Washington Consensus | 23 Comments »
Posted on March 4, 2011 by iMFdirect
By Olivier Blanchard
Before the global economic crisis, mainstream macroeconomists had largely converged on a framework for the conduct of macroeconomic policy. The framework was elegant, and conceptually simple. Caricaturing just a bit, it went like this:
- The essential goal of monetary policy was low and stable inflation. The best way to achieve it was to follow an interest rate rule. If designed right, the rule was not only credible, but delivered stable inflation and ensured that output was as close as it could be to its potential. Continue reading
Filed under: Economic Crisis, Economic research, Financial Crisis, Fiscal policy, IMF, International Monetary Fund | Tagged: capital flows, central banks, conference, currency, David Romer, economic imbalances, fiscal policy, Great Moderation, interest rates, Joseph Stiglitz, liquidity, macroeconomics, Michael Spence, monetary policy, Olivier Blanchard, swaps | 32 Comments »
Posted on February 12, 2010 by iMFdirect
As the crisis slowly recedes, the IMF has started to reassess the conduct of macroeconomic policy.
The Fund has just published a paper, “Rethinking Macroeconomic Policy,” part of a series of policy papers prepared by IMF staff reassessing the macroeconomic and financial policy framework in the wake of the devastating crisis. Several of the papers will be discussed at a conference to be held in Seoul, Korea, later this month.
IMF Survey magazine has interviewed the Fund’s Chief Economist Olivier Blanchard on the reason for the rethink. “It was tempting for macroeconomists and policymakers to take much of the credit for the steady decrease in cyclical fluctuations from the early 1980s on and to conclude that we knew how to conduct macroeconomic policy. We did not resist temptation. The crisis naturally forces us to question our earlier conclusions and that’s what we are trying to do in this paper,” he’s quoted as saying.
Paul Krugman dubbed the paper “interesting and important ” in his New York Times blog, while Richard Adams in the Guardian described it as a “break with years of economic orthodoxy” and a “stunning turnaround.”
Filed under: Advanced Economies, Asia, Economic Crisis, Economic research, Financial Crisis, Fiscal Stimulus, growth, International Monetary Fund, recession | Tagged: DSK, Joseph Stiglitz, macroeconomic policy, Olivier Blanchard, Strauss-Kahn | 5 Comments »