Rethinking Macroeconomic Policy

Abstract

The great moderation lulled macroeconomists and policymakers alike in the belief that we knew how to conduct macroeconomic policy. The crisis clearly forces us to question that assessment. In this paper, we review the main elements of the precrisis consensus, identify where we were wrong and what tenets of the precrisis framework still hold, and take a tentative first pass at the contours of a new macroeconomic policy framework. Copyright (c) 2010 The Ohio State University. The International Monetary Fund retains copyright and all other rights in the manuscript of this article as submitted for publication.

Asset prices regime-switching and the role of inflation targeting monetary policy

“…Whether a central bank should respond to asset prices is still a matter open to question (see, inter alia, Bernanke and Gertler, 2001;Wadhwani, 2008;Blanchard et al, 2010;Allen and Rogoff, 2011). As far as the BoE is concerned Cobham (2013) documents that the MPC has long maintained that the bank does not target asset prices and that the policy reaction on asset prices movements is limited to the extent that the latter pose a threat to the overall level of inflation.…”

Inflation, output and uncertainty in the era of inflation targeting – A multi-economy view on causal linkages

“…However, there is an ongoing dispute if it is sensible to insist on price stability in a stricter sense or rather to target inflation at moderate levels, around 4%, say (Blanchard et al, 2010). A popular standpoint is that the negative impacts that inflation or its uncertainty exert on economic growth and stability are of small magnitude if inflation is not overly high.…”

The Influence of Fiscal Deficit Creation on Economic Growth

“…Blanchard et al (2010) poukazujú na problémy spojené s monetárnou politikou, ktorá pri cielení infl ácie drží dlhodobo nízke úrokové miery. V prípade výraznej recesie stráca centrálna banka možnosť ovplyvniť úroveň infl ácie štandardnými monetárnymi nástrojmi.…”

“…Fiškálny defi cit môže svojou dynamikou vyrovnávať hospodársky cyklus (Blanchard et al, 2010). Nižšia volatilita produktu v krátkom období teoreticky zvyšuje rast potenciálu.…”

“…Barro vychádza z vyrovnanosti rozpočtu. Existuje veľký počet krajín, v ktorých dlhodobo prevažuje tvorba rozpočtových defi citov (Blanchard et al 2010). Kneller et al (1999) rozširujú predpoklad vyrovnanosti rozpočtu o defi cit/prebytok b. Celková rovnosť verejných fi nancií je:…”