Rethinking Economic Principles: Join the Debate


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

A Balanced Debate About Reforming Macroeconomics


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

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