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.