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. (more…)
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 »
