{
  "title": "Exploring Economic Policy Frontiers After the Crisis: 2010 IMF Research Conference",
  "publication": "IMF Blog, November 19, 2010",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2010/11/19/exploring-economic-policy-frontiers-after-the-crisis-2010-imf-research-conference",
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  "summary": "Conference focused on where economists and policymakers went wrong and implications for macroeconomic theory and macroeconomic policy making after the crisis.",
  "sections": [
    {
      "heading": "Conference context and purpose",
      "content": "- Conference focused on where economists and policymakers went wrong and implications for macroeconomic theory and macroeconomic policy making after the crisis.\n- First conference since the passing of Jacques Polak; conference framed as a tribute to Jacques, described as “a leader of critical thought during the post-war evolution of the global economy.”\n- Twelve papers were presented, providing the basis for two days of discussion among researchers and policymakers on post-crisis policymaking."
    },
    {
      "heading": "Major themes from the conference",
      "content": "- Fiscal policy and public debt\n  - The crisis increased attention to fiscal policy and rising public debt in advanced economies.\n  - Papers addressed:\n    - A framework for assessing fiscal maneuver (fiscal space) by comparing current debt levels with sustainable debt based on each country’s track record with fiscal adjustment.\n    - The optimal timing of fiscal consolidation when monetary policy is constrained by the zero lower bound.\n    - Evidence that a commitment to future consolidation can generate an immediate stimulus by lowering the long-run risk premium.\n  - Key policy difficulty: making future consolidation commitments credible today.\n\n- Monetary policy, financial conditions, and the real economy\n  - Monetary policy can lessen adverse effects of financial disruptions on the real economy.\n  - Papers and findings:\n    - A quantitative macroeconomic model showed how negative feedback between the financial sector and the real economy produced the deep contraction in the 2007-09 crisis.\n    - Policy simulations demonstrated macroeconomic benefits of a monetary policy rule that allows the policy rate to respond to changes in financial conditions.\n    - Evidence that lax monetary policy leads to a decline in risk aversion in financial markets; this effect should be considered in monetary policy design.\n  - Central policy question: whether adjustments should be via the policy rate or via macro prudential measures.\n\n- International capital flows and financial stability\n  - International capital flows can weaken financial stability.\n  - Papers and insights:\n    - A model of “hot money episodes”: crises in one country can push global investors to seek other destinations, generating inflows that may be followed by another crisis.\n    - International financial integration without fiscal integration can result in an undersupply of safe assets (high-grade sovereign bonds) and spread financial fragility.\n  - Relevance to observed capital flows to safe havens and emerging market countries highlighted.\n\n- Financial sector regulation and macroprudential policy\n  - Given the financial sector’s central role in the crisis, regulatory design and its interplay with the real economy were central.\n  - Papers emphasized:\n    - Government bailouts that are highly likely in deep crises can make firm behavior less efficient; regulation should reduce distortions from expected bailouts.\n    - The need to balance regulation: overly light regulation plus bailout expectations can encourage risky behavior and excessive expansion of the financial sector; overregulation to prevent crises can stifle economic growth.\n  - Macro prudential regulation featured prominently:\n    - Anil Kashyap’s Mundell-Fleming lecture focused on fire sales—asset sales at an excessive discount—as a source of financial and economic instability, with implications for macro prudential design.\n    - Macro prudential themes were debated in the Economic Forum concluding session."
    },
    {
      "heading": "Overarching takeaways",
      "content": "- The conference contributed to the post-crisis policy debate and underscored unresolved questions, including:\n  - Interaction between monetary policy and financial markets.\n  - The meaning and measurement of fiscal sustainability.\n  - The design and calibration of macro prudential regulation.\n- Continued research is required to inform policy on these fronts.\n\nOlivier Blanchard, November 19, 2010 — Exploring Economic Policy Frontiers After the Crisis: 2010 IMF Research Conference\n\n---\n\n Content in this bundle\n\n- Executive Summary\n  - Executive Summary (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Executive Summary (PDF){rel=\"external\" type=\"application/pdf\"}\n- Ak\n  - Ak (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Ak (PDF){rel=\"external\" type=\"application/pdf\"}\n- akrbcg\n  - akrbcg (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - akrbcg (PDF){rel=\"external\" type=\"application/pdf\"}\n- boj\n  - boj (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - boj (PDF){rel=\"external\" type=\"application/pdf\"}\n- Risk, Uncertainty and Monetary Policy\n  - Risk, Uncertainty and Monetary Policy (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Risk, Uncertainty and Monetary Policy (PDF){rel=\"external\" type=\"application/pdf\"}\n- gckkamgm\n  - gckkamgm (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - gckkamgm (PDF){rel=\"external\" type=\"application/pdf\"}\n- Rrat\n  - Rrat (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Rrat (PDF){rel=\"external\" type=\"application/pdf\"}\n- sgez\n  - sgez (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - sgez (PDF){rel=\"external\" type=\"application/pdf\"}\n- vcpk\n  - vcpk (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - vcpk (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- IMF Jacques Polak Research Conference\n- Jacques Polak\n- fiscal space\n- Economic Forum\n\nSource: https://www.imf.org/en/blogs/articles/2010/11/19/exploring-economic-policy-frontiers-after-the-crisis-2010-imf-research-conference"
    }
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    "Authors: Olivier Blanchard",
    "Published: November 19, 2010",
    "Conference focused on where economists and policymakers went wrong and implications for macroeconomic theory and macroeconomic policy making after the crisis.",
    "First conference since the passing of Jacques Polak; conference framed as a tribute to Jacques, described as “a leader of critical thought during the post-war evolution of the global economy.”",
    "Twelve papers were presented, providing the basis for two days of discussion among researchers and policymakers on post-crisis policymaking.",
    "Fiscal policy and public debt",
    "Monetary policy, financial conditions, and the real economy",
    "International capital flows and financial stability",
    "Financial sector regulation and macroprudential policy",
    "The conference contributed to the post-crisis policy debate and underscored unresolved questions, including:",
    "Continued research is required to inform policy on these fronts.",
    "**Executive Summary**",
    "**Ak**",
    "**akrbcg**",
    "**boj**",
    "**Risk, Uncertainty and Monetary Policy**",
    "**gckkamgm**",
    "**Rrat**",
    "**sgez**",
    "**vcpk**",
    "[IMF Jacques Polak Research Conference](http://www.imf.org/external/np/res/seminars/2010/arc/index.htm)",
    "[Jacques Polak](http://www.imf.org/external/pubs/ft/survey/so/2010/NEW030110A.htm)",
    "[fiscal space](http://blogs.imf.org/2010/09/01/watch-this-fiscal-space-assessing-room-for-fiscal-maneuver-in-advanced-countries/)",
    "[Economic Forum](http://www.imf.org/external/mmedia/view.asp?eventID=1972&redirect=false)"
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