Articles

The United States government openly flirting with a default on its debt is, to the financial system, like a Pope wondering out loud about the existence of God.

World leaders who are gathering for the APEC summit next week had hoped to be signing the Trans-Pacific Partnership Agreement (TPP). The pact would bring together key Pacific-rim countries into a trading bloc that the United States hopes could counter China’s growing influence in the region.

The current economic and financial crisis has given rise to a vigorous debate about the state of economics, and the training which graduate and undergraduates economics students are receiving. Importantly, among those arguing most strongly for a change in the way that young economists are trained are the ultimate employers of these students, in both the private and the public sector. Employers are increasingly complaining that young economists don’t understand how the financial system actually works, and are ill-prepared to think about appropriate policies at a time of crisis.

what have we learned from the crisis and what should we have learned?

Simon Johnson, Professor at MIT and former chief economist of the IMF, calls for much higher capital requirements for big banks.

The global financial cycle has transformed the well-known trilemma into a ‘dilemma’. Independent monetary policies are possible if and only if the capital account is managed directly or indirectly. This column argues the right policies to deal with the ‘dilemma’ should aim at curbing excessive leverage and credit growth. A combination of macroprudential policies guided by aggressive stress‐testing and tougher leverage ratios are needed. Some capital controls may also be useful.

Where will today’s innovation come from?

Recent austerity policies have been guided by ideology rather than research. This column discusses research that reconciles disparate estimates of fiscal multipliers in the literature. It finds that common identification assumptions are problematic. Matching methods based on propensity scores show how contractionary austerity really is, especially in economies operating below potential.

Did the global economic collapse in 2008 stem from structural failures in the capitalist system?

is the public sector really sclerotic and conservative in contrast with a dynamic and innovative private sector?