Economic Policy

Navigating the Turning Point

From MIT to IMF

By the evidence of the recent IMF conference, there is apparently now consensus that the global financial crisis has killed--“shattered” (David Romer), “destroyed” (Stiglitz)--pre-crisis academic economic orthodoxy. But that orthodoxy had many dimensions, and there is no consensus on where repair efforts are most immediately necessary.

Instead, we see a division of labor emerging in which everyone focuses on that one dimension where they feel themselves to have some special expertise. In such a situation, an overall map may be helpful for making sense of the reconstruction effort as a whole. Read more

Posted by Perry G. Mehrling at 12:28 pm

IMF Calls for New Economic Thinking

Or Does It?

History will record that the IMF’s conference last week (March 7-8), titled ”Macro and Growth Policies in the Wake of the Crisis”, marked a turning point in mainstream economic debate within academia, probably only one turning point in the crooked road that lies ahead, but nonetheless a significant moment.

Olivier Blanchard, Director of Research at the IMF, struck the significant note in the opening minutes of the first session (2:50 in Session 1). According to him (and I paraphrase), before the crisis, mainstream economic thinking had converged on a beautiful construction in terms of monetary policy, namely “inflation targeting”. We had convinced ourselves that it was enough to focus our attention on one target (inflation), and one instrument (the policy interest rate) to achieve that target.

Read more

Posted by Perry G. Mehrling at 6:36 pm

"The New Lombard Street" in Bloomberg's Top 10

Bloomberg has recently called The New Lombard Street, the new book by INET Advisory Board Member Perry Mehrling, one of the top books on economics this year. Read more

Posted by Michael Filtz at 3:20 pm

Charles Ferguson Wins the Oscar for Best Documentary

Documentary filmmaker Charles Ferguson won the Oscar for best documentary for his film “Inside Job,” which was about the roots of the 2008 financial crisis. Read more

Posted by Michael Filtz at 6:46 pm

Richard Koo: Japanese Economic Déjà Vu

How the West is Falling Into the Same Trap as Japan in the 1990s of Failing to Understand the Strangeness of a “Balance Sheet Recession”

The world has witnessed an economic experiment since the global crash of 2008 and the ensuing Great Recession. China immediately provided a massive and sustained fiscal stimulus. The Western countries also initially provided a stimulus, but relatively quickly shifted to austerity and deficit reduction. The result: China is back booming, and the Western economies are struggling, with those cutting deeper faring worse. Read more

Robert Johnson: Focus on Inequality, Not Inflation

INET’s Executive Director Rob Johnson was recently interviewed by a reporter for CNBC India, who asked him about the risk of endemic inflation - specifically, whether fears of an inflationary spiral are justified. Read more

Posted by Michael Filtz at 1:53 pm

Political Economy of Controlling Systemic Risk: What Governments Can vs. What Governments are Willing to do

Author: 
Edward J. Kane

"...In directing panelists to distinguish between what governments “can” and “will” do, this session’s title frames economic policymaking as a balancing act. Principled efforts to define and pursue the public interest are contested and repeatedly knocked off course by conflicting personal, bureaucratic, and political concerns that impinge on government decisionmakers..."

Presented at the INET Conference @ King’s College, April 8-11, 2010 Read more

When Wolves Cry “Wolf”: Systemic Financial Crises and the Myth of the Danaid Jar

Author: 
Thomas Ferguson
Robert Johnson

 

Paper given at the Conference @ King's, April 8th-11th, 2010.

Abstract:

Financial crises are staggeringly costly. Only major wars rival them in the burdens they place on public finances. Taxpayers typically transfer enormous resources to banks, their stockholders, and creditors, while public debt explodes and the economy runs below full employment for years. Read more

The Crisis of the Export Led Model in the EMU Countries and Its Monetary and Financial Consequences on European Integration

Author: 
Marcello de Cecco

"...Considerable agreement exists in Continental Europe on the fact that it was the US authorities’ thoughtless financial liberalization policy over the last two decades at least, and therefore bipartisan, to have brought about the subprime disaster and, furthermore, that it was the US authorities’ decision to sink Lehman to start the chain reaction that brought the international financial system to paralysis from Sept.15th, 2008 to the spring of 2009..."

Paper given at the Conference @ King's, April 8th-11th, 2010. Read more