The global financial crisis caused hardship and suffering all over the world. To prevent a repeat, we need to rethink… "… what we know about economic theory …. We need to rethink, following this, the policies … coming from the analytical work. And then we will need also to rethink multilateralism." IMF Managing Director Dominique Straus-Kahn (April, 2011) A wholesale reexamination of macroeconomic principles in the wake of the crisis was the goal of a conference at the IMF in early March. But, for Olivier Blanchard and others, the conference was merely “the beginning of a conversation, the beginning of an exploration.” Here is our list of recommended reads to help you be part of the conversation.
The most remarkable aspect of the recent conference at the IMF was the broad consensus that the macroeconomic models that had been relied upon in the past and had informed major aspects of monetary and macro-policy had failed. They failed to predict the crisis and they provided limited guidance on how the economy should respond. There was also remarkable consensus about many elements of policy in responding to the crisis, and there were even large areas of policy consensus for the longer run. In short, the conference made an important contribution in invigorating a balanced debate about reforming macroeconomics.