Akerlof et al (eds ) what have we learned; macroeconomic policy after the crisis (2014)

Macroeconomic Policy after the Crisis edited by George Akerlof, Olivier Blanchard, David Romer, and Joseph Stiglitz Introduction: Rethinking Macro Policy II-Getting Granular Olivier Blanchard, Giovanni Dell'Ariccia, and Paolo Mauro Part I: Monetary Policy Many Targets, Many Instruments: Where Do We Stand? Janet L.Yellen Monetary Policy, the Only Game in Town? Lorenzo Bini Smaghi Monetary Policy during the Crisis: From the Depths to the Heights Mervyn A.King Monetary Policy Targets after the Crisis Michael Woodford Part II: Macroprudential Policy Macroprudential Policy in Prospect Andrew Haldane Macroprudential Policy and the Financial Cycle: Some Stylized Facts and Policy Suggestions Claudio Borio Macroprudential Policy in Action: Israel Stanley Fischer Korea's Experiences with Macroprudential Policy Choongsoo Kim Part III: Financial Regulation Everything the IMF Wanted to Know about Financial Regulation and Wasn't Afraid to Ask Sheila Bair 10 Regulating Large Financial Institutions Jeremy C.Stein 11 The Contours of Banking and the Future of Its Regulation Jean Tirole 12 Banking Reform in Britain and Europe John Vickers 13 Leverage, Financial Stability, and Deflation Adair Turner Part IV: Fiscal Policy 14 Defining the Reemerging Role of Fiscal Policy Janice Eberly 15 Fiscal Policy in the Shadow of Debt: Surplus Keynesianism Still Works Anders Borg 16 Fiscal Policies in Recessions Roberto Perotti 17 Fiscal Policy Nouriel Roubini Part V: Exchange Rate Arrangements 18 How to Choose an Exchange Rate Arrangement Agustin Carstens 19 Rethinking Exchange Rate Regimes after the Crisis Jay C.Shambaugh 20 Exchange Rate Arrangements: Spain and the United Kingdom Martin Wolf 21 Exchange Rate Arrangements: The Flexible and Fixed Exchange Rate Debate Revisited Gang Yi Part VI: Capital Account Management 22 Capital Account Management: Toward a New Consensus? Duvvuri Subbarao 23 Capital Flows and Capital Account Management Jose De Gregorio 24 Managing Capital Inflows in Brazil Marcio Holland 25 Capital Account Management Helene Rey Part VII: Conclusions 26 The Cat in the Tree and Further Observations: Rethinking Macroeconomic Policy II George A.Akerlof 27 Rethinking Macroeconomic Policy Olivier Blanchard 28 Preventing the Next Catastrophe: Where Do We Stand? David Romer 29 The Lessons of the North Atlantic Crisis for Economic Theory and Policy Joseph E.Stiglitz Contributors Index Olivier Blanchard, Giovanni Dell'Ariccia, and Paolo Mauro The 2008-2009 global economic and financial crisis and its aftermath keep forcing policymakers to rethink macroeconomic policy First was the Lehman crisis, which showed how much policymakers had underestimated the dangers posed by the financial system and demonstrated the limits of monetary policy Then it was the euro area crisis, which forced them to rethink the workings of currency unions and fiscal policy And throughout, they have had to improvise, from the use of unconventional monetary policies, to the provision of the initial fiscal stimulus, to the choice of the speed of fiscal consolidation, to the use of macroprudential instruments We took a first look at the issues a few years ago, both in a paper (Blanchard, Dell'Ariccia, and Mauro 2010) and at an IMF conference in 2011 (Blanchard et al 2012) There was a clear sense among both researchers and policymakers participating in the conference that we had entered a "brave new world" and that we had more questions than answers Two years later, the contours of monetary, fiscal, and macroprudential policies remain unclear But policies have been tried and progress has been made, both theoretical and empirical This introduction updates the status of the debate It was prepared for a second conference that was hosted by the IMF on the same topic in spring 2013 and as a springboard for further discussion A few observations on the scope of the analysis: our comments focus on the design of macroeconomic policy after the global economy emerges from the crisis rather than on current policy choices, such as the design of exit policies from quantitative easing or the pros and cons of moneyfinanced fiscal stimulus The two sets of issues are obviously related, but our objective is to analyze some general principles that could be used to guide macroeconomic policy in the future rather than to suggest specific measures to be taken today We also take a relatively narrow view of macroeconomic policy, leaving out any discussion of structural reforms and financial regulation Although the border between financial regulation and macroprudential policies is fuzzy, we concentrate on the cyclical component of financial regulation rather than on the overall design of the financial architecture This introduction is organized in three main sections: monetary policy, fiscal policy, and-what may be emerging as the third leg of macroeconomic policy-macroprudential policies Monetary Policy The monetary policy theme that emerged from the first conference on rethinking macro policy, held in March 2011, was that central banks had to move from an approach based largely on one target and ... financed by the sale of short-term assets) and a conventional monetary expansion (the purchase of short-term assets with central bank money) The question is whether, at the zero bound, the monetary... financial institutions and between the financial sector and the real economy The same bank balance sheet can have very different implications for systemic risk depending on the balance sheets (and the. .. observations on the scope of the analysis: our comments focus on the design of macroeconomic policy after the global economy emerges from the crisis rather than on current policy choices, such as the design