IMF Survey: IMF Triggers Debate on Crisis Lessons

IMF News, March 8, 2011

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Event aimed to prompt a wholesale re-examination of macroeconomic policy principles in the wake of the global economic crisis.
Conference dates: March 7-8, 2011.
Conference goal: take stock of policy questions posed by the crisis and promote discussion about answers and new policy approaches for the post-crisis era.
Conference was webcast live; IMF planned an online discussion site after the conference to continue dialogue.

Co-hosts: Olivier Blanchard (Director of the IMF’s Research Department), David Romer (University of California, Berkeley), Michael Spence (Stanford University), Joseph Stiglitz (Columbia University).
Additional panelists included Nobel laureates George Akerlof and Robert Solow, leading policymakers and academics from advanced and emerging countries, and representatives from civil society, the private sector, and the media.
The IMF’s mandate: advise its 187 member countries on economic and financial policies.
Public engagement: the conference triggered wider online debate among economists (examples cited: Brad deLong and Paul Krugman).

Re-examination prompted by failures of the pre-crisis macroeconomic framework, described as an “elegant and conceptually simple” framework emphasizing:
- Single monetary policy target—low and stable inflation.
- Single policy instrument—the central bank’s policy rate.
Key points raised by Olivier Blanchard:
- Elements of the old framework no longer hold post-crisis.
- Financial regulation had been outside the macroeconomic policy framework.
- Fiscal policy had a limited role, at least in the short run.
Crisis-driven expansions of policy targets discussed:
- Consideration of extending interest rate rules to deal with asset prices.
- Addition of targets such as leverage and measures of systemic risk.
Blanchard proposed reconsideration across areas including: economic imbalances, interest rates, fiscal policy, capital flows, the international monetary system, and financial safety nets.

Joseph Stiglitz: U.S. Federal Reserve quantitative easing was effectively a “backdoor bailout” for banks.
David Romer: fiscal stimulus should have been higher—argued as much as US$ 2 trillion.
The crisis has revived long-standing debates on policy instruments and targets, especially for monetary policy.

IMF leadership emphasized open discussion and partnership with the academic community to find practical solutions (statements by Dominique Strauss-Kahn and Olivier Blanchard).
John Lipsky: international policy cooperation remains crucial; policy coherence and consistency were underscored by the crisis.
Conference focus areas for concrete policy recommendations:
- Monetary policy
- Fiscal policy
- Financial intermediation and regulation
- Capital account management
- Growth strategies
- The international monetary system
Objective: revive sustainable growth while safeguarding macroeconomic and financial stability.

Article: IMF Survey online, March 8, 2011 — IMF Triggers Debate on Crisis Lessons