In the Wake of the Crisis: Leading Economists Reassess Economic Policy

In the Wake of the Crisis: Leading Economists Reassess Economic Policy

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by Olivier J. Blanchard
     
 

In 2011, the International Monetary Fund invited prominent economists and economic policy makers to consider the brave new world of the post-crisis global economy. The result is a book that captures the state of macroeconomic thinking at a transformational moment.

The crisis and the weak recovery that has followed raise fundamental questions concerning

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Overview

In 2011, the International Monetary Fund invited prominent economists and economic policy makers to consider the brave new world of the post-crisis global economy. The result is a book that captures the state of macroeconomic thinking at a transformational moment.

The crisis and the weak recovery that has followed raise fundamental questions concerning macroeconomics and economic policy.
For instance, to what extent are financial markets efficient and self-correcting?
How crucial is low and stable inflation for growth and the real stability of the economy? How strong is the case for open capital markets? Too often, the standard models provided insufficient guidance on how to respond to the unprecedented situations created by the crisis. As a result, policy makers have been forced to improvise. What to do when interest rates reach the zero floor? How best to provide liquidity to segmented financial institutions and markets? How much to use fiscal policy starting from high levels of debt?

These top economists discuss future directions for monetary policy, fiscal policy, financial regulation,
capital account management, growth strategies, and the international monetary system, and the economic models that should underpin thinking about critical policy choices. Among the new realities they consider are the swing of the pendulum toward regulation; the need for new theoretical approaches, incorporating advances in agency theory, behavioral economics, and understanding of credit markets and finance based on theories of imperfect information; and the importance for macroeconomic policy to target not just inflation but also output and financial stability.

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Product Details

ISBN-13:
9780262017619
Publisher:
MIT Press
Publication date:
02/24/2012
Pages:
256
Product dimensions:
6.30(w) x 9.00(h) x 1.20(d)
Age Range:
18 Years

Meet the Author

Olivier J. Blanchard is Economic Counselor and Director of the Research Department at the International Monetary Fund. He is the author of
Macroeconomics
, among other books, and coauthor of Lectures on Macroeconomics (MIT Press). David Romer is Herman Royer Professor of Political Economy at the University of California, Berkeley, and author of Advanced Macroeconomics. Michael Spence, co-recipient of the 2001 Nobel Prize in Economics, is Professor Emeritus of Management at Stanford University's Graduate School of Business and Professor of Economics at New York University's Stern School of Business. He served as Chairman of the Commission on Growth and Development from 2006 to 2010 (the life of the commission). He is the author of
The Next Convergence: The Future of Economic Growth in a Multispeed World. Joseph E. Stiglitz, co-recipient of the 2001 Nobel Prize in Economics, is University Professor at Columbia University. He served as Chairman of the U.S. Council of Economic Advisors in the Clinton administration, and from 1997
to 2000 as World Bank Chief Economist and Senior Vice President in Development Economics. He is the author of Freefall: Free Markets and the Sinking of the World Economy, Globalization and Its Discontents, and other books.

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Table of Contents

Preface ix

I Monetary Policy

Questions: How Should the Crisis Affect Our Views of Monetary Policy? 3

1 Monetary Policy in the Wake of the Crisis Olivier Blanchard 7

2 Conventional Wisdom Challenged? Monetary Policy after the Crisis Guillermo Ortiz 15

3 Lessons for Monetary Policy Otmar Issing 25

4 Macroeconomics, Monetary Policy, and the Crisis Joseph Stiglitz 31

II Fiscal Policy

Questions: How Should the Crisis Affect Our Views of Fiscal Policy? 45

5 Fiscal Stimuli and Consolidation Parthasarathi Shome 49

6 What Have We Learned about Fiscal Policy from the Crisis? David Romer 57

7 Fiscal Policy Responses to Economic Crisis: Perspectives from an Emerging Market Sri Mulyani Indrawati 67

8 Fiscal Policy Robert Solow 73

III Financial Intermediation and Regulation

Questions: How Should the Crisis Affect Our Views about Financial Intermediation and Regulation? 79

9 Financial Crisis and Financial Intermediation: Asking Different Questions Y. V. Reddy 83

10 Global Liquidity Hyun Song Shin 91

11 Optimal Financial Intermediation: Why More Isn't Always Better Adair Turner 101

12 Process, Responsibility, and Myron's Law Paul Romer 111

IV Capital-Account Management

Questions: How Should the Crisis Affect Our Views of Capital-Account Management? 127

13 Notes on Capital-Account Management Ricardo Caballero 129

14 Remarks on Capital-Account Management and Other Macropolicy Topics Arminio Fraga 133

15 Capital-Account Management: Key Issues Rakesh Mohan 137

16 The Case for Regulating Cross-Border Capital Flows José Antonio Ocampo 145

V Growth Strategies

Questions: How Should the Crisis Affect Our Views of Growth and Growth Strategies? 153

17 Do We Need to Rethink Growth Policies? Dani Rodrik 157

18 Is the Chinese Growth Model Replicable? Andrew Sheng 169

19 Growth in the Postcrisis World Michael Spence 175

VI The International Monetary System

Questions: How Should the Crisis Affect Our Views of the International Monetary System? 187

20 The Implications of Cross-Border Banking and Foreign-Currency Swap Lines for the International Monetary System Már Gu∂mundsson 191

21 The International Monetary System Olivier Jeanne 199

22 International Monetary System Reform: A Practical Agenda Charles Collyns 209

23 Liquidity and the International Monetary System Maurice Obstfeld 215

Concluding Remarks Olivier Blanchard 225

List of Contributors 229

Index 233

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