## Exploring Economic Policy Frontiers After the Crisis: 2010 IMF Research Conference _IMF Blog, November 19, 2010_ ## Source details **Canonical URL:** [Exploring Economic Policy Frontiers After the Crisis: 2010 IMF Research Conference](https://www.imf.org/en/blogs/articles/2010/11/19/exploring-economic-policy-frontiers-after-the-crisis-2010-imf-research-conference) ## Other formats - [Markdown version](/en/blogs/articles/2010/11/19/exploring-economic-policy-frontiers-after-the-crisis-2010-imf-research-conference/index.md) - [Structured JSON version](/en/blogs/articles/2010/11/19/exploring-economic-policy-frontiers-after-the-crisis-2010-imf-research-conference/index.json) - [Bundle manifest](/en/blogs/articles/2010/11/19/exploring-economic-policy-frontiers-after-the-crisis-2010-imf-research-conference/bundle-manifest.json) ## Bibliographic details - Authors: Olivier Blanchard - Published: November 19, 2010 --- ### Conference context and purpose - 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. ### Major themes from the conference - Fiscal policy and public debt - The crisis increased attention to fiscal policy and rising public debt in advanced economies. - Papers addressed: - 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. - The optimal timing of fiscal consolidation when monetary policy is constrained by the zero lower bound. - Evidence that a commitment to future consolidation can generate an immediate stimulus by lowering the long-run risk premium. - Key policy difficulty: making future consolidation commitments credible today. - Monetary policy, financial conditions, and the real economy - Monetary policy can lessen adverse effects of financial disruptions on the real economy. - Papers and findings: - 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. - Policy simulations demonstrated macroeconomic benefits of a monetary policy rule that allows the policy rate to respond to changes in financial conditions. - Evidence that lax monetary policy leads to a decline in risk aversion in financial markets; this effect should be considered in monetary policy design. - Central policy question: whether adjustments should be via the policy rate or via macro prudential measures. - International capital flows and financial stability - International capital flows can weaken financial stability. - Papers and insights: - 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. - International financial integration without fiscal integration can result in an undersupply of safe assets (high-grade sovereign bonds) and spread financial fragility. - Relevance to observed capital flows to safe havens and emerging market countries highlighted. - Financial sector regulation and macroprudential policy - Given the financial sector’s central role in the crisis, regulatory design and its interplay with the real economy were central. - Papers emphasized: - Government bailouts that are highly likely in deep crises can make firm behavior less efficient; regulation should reduce distortions from expected bailouts. - 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. - Macro prudential regulation featured prominently: - 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. - Macro prudential themes were debated in the Economic Forum concluding session. ### Overarching takeaways - The conference contributed to the post-crisis policy debate and underscored unresolved questions, including: - Interaction between monetary policy and financial markets. - The meaning and measurement of fiscal sustainability. - The design and calibration of macro prudential regulation. - Continued research is required to inform policy on these fronts. *Olivier Blanchard, November 19, 2010 — Exploring Economic Policy Frontiers After the Crisis: 2010 IMF Research Conference* --- ## Content in this bundle - **Executive Summary** - [Executive Summary (Markdown version)](/external/np/res/seminars/2010/arc/pdf/agjkemjomq.pdf.md){rel="alternate" type="text/markdown"} - [Executive Summary (PDF)](/external/np/res/seminars/2010/arc/pdf/agjkemjomq.pdf){rel="external" type="application/pdf"} - **Ak** - [Ak (Markdown version)](/external/np/res/seminars/2010/arc/pdf/ak.pdf.md){rel="alternate" type="text/markdown"} - [Ak (PDF)](/external/np/res/seminars/2010/arc/pdf/ak.pdf){rel="external" type="application/pdf"} - **akrbcg** - [akrbcg (Markdown version)](/external/np/res/seminars/2010/arc/pdf/akrbcg.pdf.md){rel="alternate" type="text/markdown"} - [akrbcg (PDF)](/external/np/res/seminars/2010/arc/pdf/akrbcg.pdf){rel="external" type="application/pdf"} - **boj** - [boj (Markdown version)](/external/np/res/seminars/2010/arc/pdf/boj.pdf.md){rel="alternate" type="text/markdown"} - [boj (PDF)](/external/np/res/seminars/2010/arc/pdf/boj.pdf){rel="external" type="application/pdf"} - **Risk, Uncertainty and Monetary Policy** - [Risk, Uncertainty and Monetary Policy (Markdown version)](/external/np/res/seminars/2010/arc/pdf/gbmhml.pdf.md){rel="alternate" type="text/markdown"} - [Risk, Uncertainty and Monetary Policy (PDF)](/external/np/res/seminars/2010/arc/pdf/gbmhml.pdf){rel="external" type="application/pdf"} - **gckkamgm** - [gckkamgm (Markdown version)](/external/np/res/seminars/2010/arc/pdf/gckkamgm.pdf.md){rel="alternate" type="text/markdown"} - [gckkamgm (PDF)](/external/np/res/seminars/2010/arc/pdf/gckkamgm.pdf){rel="external" type="application/pdf"} - **Rrat** - [Rrat (Markdown version)](/external/np/res/seminars/2010/arc/pdf/rrat.pdf.md){rel="alternate" type="text/markdown"} - [Rrat (PDF)](/external/np/res/seminars/2010/arc/pdf/rrat.pdf){rel="external" type="application/pdf"} - **sgez** - [sgez (Markdown version)](/external/np/res/seminars/2010/arc/pdf/sgez.pdf.md){rel="alternate" type="text/markdown"} - [sgez (PDF)](/external/np/res/seminars/2010/arc/pdf/sgez.pdf){rel="external" type="application/pdf"} - **vcpk** - [vcpk (Markdown version)](/external/np/res/seminars/2010/arc/pdf/vcpk.pdf.md){rel="alternate" type="text/markdown"} - [vcpk (PDF)](/external/np/res/seminars/2010/arc/pdf/vcpk.pdf){rel="external" type="application/pdf"} --- ## References - [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) _Source: https://www.imf.org/en/blogs/articles/2010/11/19/exploring-economic-policy-frontiers-after-the-crisis-2010-imf-research-conference_