Rethinking macro policy
Olivier Blanchard, Giovanni Dell'Ariccia, Paolo Mauro 16 February 2010
The global crisis forced economic policymakers to react in ways not anticipated by the pre-crisis consensus on how macroeconomic policy should be conducted. Here the IMF’s chief economist and colleagues (i) review the main elements of the pre-crisis consensus, (ii) identify the elements which turned out to be wrong, and (iii) take a tentative first pass at outlining the contours of a new macroeconomic policy framework.
The great moderation (Gali and Gambetti 2009) lulled macroeconomists and policymakers alike in the belief that we knew how to conduct macroeconomic policy. The crisis clearly forces us to question that assessment. In a recent IMF Staff Position Note (Blanchard, Dell’Ariccia and Mauro 2010, which includes a bibliography), we review the main elements of the pre-crisis consensus, we seek to identify what elements were wrong and what tenets of the pre-crisis framework still hold, and we take a tentative first pass at the contours of a new macroeconomic policy framework.
inflation targetting, pre-crisis macro concensus, financial regulation and macroeconomic policy
Why central banking is no longer boring
Guido Tabellini 23 June 2008
The ECB and the Fed are pursuing very different policies on inflation fighting and the use of monetary aggregates in guiding policy. One of Italy’s leading economists argues that either the ECB or the Fed is making a mistake.
Until a year ago, central bankers could boast with satisfaction that monetary policy had become boring. A widely shared “best practice” was followed by almost all central banks. Any controversies concerned technical nuances that were really only relevant to professionals in the field. Then came the credit crisis – and all certainties went out the window. Now new dilemmas are emerging, and many central banks have embarked on different routes. Within a few years, we will know who was right and who wasn’t.
ECB, inflation, Central Banks, Federal Reserve, inflation targetting