IMF Draws Lessons from the Crisis, Reviews Macro Policy Framework

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.”

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