## IMF Survey : IMF Brings Together Top Economic Thinkers to Debate Crises

_IMF News, November 20, 2013_

## Source details

**Canonical URL:** [IMF Survey : IMF Brings Together Top Economic Thinkers to Debate Crises](https://www.imf.org/en/news/articles/2015/09/28/04/53/sores112113a)

## Other formats

- [Markdown version](/en/news/articles/2015/09/28/04/53/sores112113a/index.md)
- [Structured JSON version](/en/news/articles/2015/09/28/04/53/sores112113a/index.json)
- [Bundle manifest](/en/news/articles/2015/09/28/04/53/sores112113a/bundle-manifest.json)

## Bibliographic details
- Authors: M. Ayhan Kose, Rafael Portillo
- Published: November 20, 2013

---

### Conference overview
- Event: The Fourteenth Jacques Polak Annual Research Conference, hosted by the IMF at its Washington, D.C., headquarters on November 7 and 8.
- Purpose: Forum to discuss recent research on financial crises and honor Stanley Fischer’s contributions to economic research and policy.
- Contributors: Leading economists and policymakers, including presentations and a concluding session featuring Larry Summers, Ken Rogoff, Stanley Fischer, Ben Bernanke, and Olivier Blanchard.
- Framing observation: “Great minds do not always think alike,” highlighting the value of debate for paradigm-shifting events.

### Exchange rate regime: a central choice
- Key proposition (Paul Krugman): Likelihood of a confidence crisis greatly depends on the exchange rate regime; countries that retain their own currencies are less likely to face runs on their debt, and runs that do occur are likely to have expansionary effects on activity.
- IMF staff findings (Atish Ghosh, Jonathan Ostry, Mahvash Qureshi): Countries with less flexible exchange rate regimes tend to face greater macroeconomic and financial vulnerabilities.
- Empirical evidence (Kristin Forbes and Michael Klein): Large currency depreciations and major reserve sales help promote growth shortly after a crisis; interest rate increases appear to have the opposite effect.
- Policy nuance (Emmanuel Farhi with Iván Werning): Temporary capital controls—even under a flexible exchange rate regime—can help smooth out capital-flow driven business cycles.
- Policy implication: Exchange rate flexibility, reserves management, and calibrated capital-flow measures matter for crisis resilience.

### Structural and fiscal policies: lessons from past crises
- Japan case (Takeo Hoshi and Anil Kashyap): Delay in bank recapitalization and lack of structural reforms helped explain prolonged stagnation in Japan during the 1990s; these lessons are relevant for some European countries slow to undertake reforms.
- Fiscal policy role: Papers document a potent role played by fiscal policy during the East Asian and Latin American crises; the stance of fiscal policy has been a major determinant of economic performance in peripheral European countries in recent years.
- Regional improvement (Latin America): Presentations confirm that macroeconomic policy has improved considerably in many emerging Latin American economies, with monetary and fiscal policies increasingly becoming countercyclical.
- Policy implication: Prompt bank recapitalization, structural reforms, and countercyclical fiscal policies strengthen recovery prospects.

### Following Fischer’s prescriptions and monetary innovations
- Fischer’s 2001 prescriptions (as discussed by Maurice Obstfeld): Emerging markets broadly followed recommendations of greater exchange rate flexibility, ample reserves, and moderate public debt levels—factors that helped them weather the global financial crisis.
- Monetary policy research (U.S. Federal Reserve staff papers):
  - Hysteresis hypothesis: Depressed demand may have decreased potential output over time; expansionary monetary policies can be beneficial.
  - Forward guidance with thresholds: Fed’s use of forward guidance with thresholds has helped improve macroeconomic outcomes even when interest rates are constrained by the zero lower bound.
- Policy implication: Exchange rate flexibility, reserve buffers, moderate public debt, expansionary monetary policy when warranted, and forward guidance are important tools in crisis management.

### Final session: crisis management insights from senior policymakers
- Ben Bernanke:
  - Emphasized historical perspective and parallels between the financial panic of 1907 and the recent crisis.
  - Identified key aspects of crisis management: liquidity provision, measures to restore public confidence in the financial system, and closure of regulatory gaps after the crisis subsides.
- Stanley Fischer:
  - Three lessons from the global financial crisis: effectiveness of unconventional monetary policies such as credit easing; importance of quick action to fix banking and debt problems; role of macroprudential supervision to address systemic financial risks.
  - Noted difficulty of predicting the next crisis: “generals prepare for the last wear, economists prepare for the last crisis, and sometimes the last war is very similar to the next war, and sometimes it isn’t.”
- Kenneth Rogoff:
  - Stressed early diagnosis of liquidity and solvency problems, using a medical analogy: delayed treatment of chronic conditions makes crises harder to remedy.
  - Argued that deep financial crises require forceful and innovative policy responses.
- Larry Summers:
  - Raised the possibility of “secular stagnation” in the United States and that zero nominal interest rates may be a durable feature.
  - Called for more aggressive fiscal and monetary policies to lay foundations for durable growth.
  - Warning: “one has to be concerned about a policy agenda that is doing less with monetary policy than has been done before, doing less with fiscal policy than has been done before.”
- Overarching message: Liquidity provision, rapid repair of banking/debt problems, macroprudential supervision, early diagnosis of solvency issues, and a willingness to use aggressive fiscal and monetary tools are central to effective crisis response.

### Key takeaways and policy recommendations
- Exchange rate and reserves:
  - Greater exchange rate flexibility and ample reserves can reduce vulnerability to confidence crises.
  - Temporary capital controls can be useful even with flexible exchange rates to smooth capital-flow driven cycles.
- Financial sector actions:
  - Quick bank recapitalization and structural reforms prevent prolonged stagnation.
  - Macroprudential supervision is essential to address systemic risks.
- Fiscal and monetary policy:
  - Countercyclical fiscal policy and forceful, innovative monetary policy (including unconventional tools and forward guidance) support recovery.
  - Be prepared to use more aggressive fiscal and monetary measures when structural conditions (e.g., potential secular stagnation) warrant.
- Crisis management principles:
  - Provide liquidity, restore public confidence, close regulatory gaps, and diagnose liquidity versus solvency problems early.
  - Recognize limits of prediction and prepare adaptable policy toolkits.

*IMF Survey — By M. Ayhan Kose and Rafael Portillo, November 20, 2013*

---

## Content in this bundle

- [Charipdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_charipdf.pdf){rel="external" type="application/pdf"}
- [Degpdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_degpdf.pdf){rel="external" type="application/pdf"}
- [Englishpdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_englishpdf.pdf){rel="external" type="application/pdf"}
- [Farhipdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_farhipdf.pdf){rel="external" type="application/pdf"}
- [Forbespdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_forbespdf.pdf){rel="external" type="application/pdf"}
- [Hoshipdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_hoshipdf.pdf){rel="external" type="application/pdf"}
- [Krugmanpdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_krugmanpdf.pdf){rel="external" type="application/pdf"}
- [Maurypdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_maurypdf.pdf){rel="external" type="application/pdf"}
- [Ostrypdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_ostrypdf.pdf){rel="external" type="application/pdf"}
- [Veghpdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_veghpdf.pdf){rel="external" type="application/pdf"}
- [Wilcoxpdf (PDF)](/-/media/websites/imf/imported/external/np/res/seminars/2013/arc/pdf/_wilcoxpdf.pdf){rel="external" type="application/pdf"}

---

## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Research](https://www.imf.org/en/news/search)
- [Research Conference agenda and papers](http://www.imf.org/external/np/res/seminars/2013/arc/index.htm)
- [Blog: Redefining Monetary Policy](http://blog-imfdirect.imf.org/2013/11/19/monetary-policy-will-never-be-the-same/)
- [Video: Stanley Fischer Interview](http://www.imf.org/external/mmedia/view.aspx?vid=2837226592001)
- [Webcast: Policy Responses to Crises](http://www.imf.org/external/mmedia/view.aspx?vid=2821294542001)
- [final session](http://www.imf.org/external/np/res/seminars/2013/arc/index1.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/sores112113a_