Macroeconomics After the Great Recession

IMF News, November 3, 2016

Source details

Opening remarks at the Seventeenth Jacques Polak Annual Research Conference.
Conference theme: “Macroeconomics After the Great Recession.”
Context: It has now been eight years since the outbreak of the global financial crisis.
Key diagnostic points:
- The crisis challenged existing macroeconomic models, especially integration of financial sector developments.
- Limits were exposed in knowledge of how the economy functions.
Open questions highlighted for further research and debate:
- How to stimulate growth and boost productivity?
- How to make countries more resilient to financial shocks?
- How to ensure that globalization works for all?

Conference is in honor of Olivier Blanchard, who joined the Fund on September 1, 2008.
Olivier’s contributions emphasized:
- Intellectual leadership during the crisis and in shaping policy advice.
- Willingness to address controversial topics: capital controls, the role of fiscal policy and fiscal multipliers, and whether central banks should target higher inflation rates.
- Organization of three “Rethinking Macroeconomics” conferences during his tenure at the Fund.
Institutional and cultural shifts attributed to Olivier’s leadership:
- Research Department’s role in forming the so-called institutional view on capital flows.
- Recognition that capital controls could play a useful role in some circumstances (previously considered a “taboo” subject).

The conference program is organized into three areas aligned with Olivier’s research agenda:

1. Changing framework of monetary and exchange rate policies

Unconventional monetary policies adopted by major central banks helped prop up advanced economies but their effectiveness is debated.
Cross-border spillovers of these policies are a subject of much debate.
The Fund engages on managing resulting capital flow volatility.

2. Effects of fiscal policy on output

Fiscal policy topics span assessing fiscal space, use for aggregate demand management, mitigating climate change, and lessening inequality.
Olivier’s research on fiscal multipliers revealed they had been underestimated and could be much larger in recession-hit economies—or when monetary policy was constrained by the zero lower bound; this finding had profound implications for the Fund’s policy design.
Remaining research needs: macroeconomic impact of fiscal policies, what constitutes safe debt levels, and how quickly to return to safe debt levels without damaging growth.

3. Structural reforms and labor market policies

Securing sustainable and inclusive growth is a key priority of the IMF’s work program.
Research supports inclusive growth policies and broadens understanding of causes of inequality and consequences for growth, and the impact of labor market reforms.
Several papers explore how to boost employment and productivity.

Featured events and speakers:
- Larry Summers to deliver the Mundell-Fleming Lecture on “Macroeconomic Policy and Secular Stagnation.”
- Economic Forum moderated by Maurice Obstfeld featuring a group of panelists discussing policy challenges after the Great Recession.

Personal remarks on Olivier Blanchard:
- Praised as an exceptional researcher, intellectual leader, friend, colleague, mentor, and the “economist’s economist.”
New initiatives:
- Commencement of an “Olivier Blanchard Internship Award” last year to recognize outstanding research talents among young summer interns at the IMF’s Research Department; the first winner will be announced soon.
Anecdote illustrating change in perception:
- A few decades ago Olivier advised David Lipton that “if you go to the IMF, you will be throwing your career away.” Now Olivier’s name helps attract young talent—described as the world having done a 180–degree turn.
Closing: Best wishes for the conference.

Opening Remarks by IMF Managing Director Christine Lagarde at the Seventeenth Jacques Polak Annual Research Conference, November 3, 2016.