In search of a smoking gun: macroeconomic policies and the crisis
This paper looks at macroeconomic factors behind the current crisis. The first part looks at how global macroeconomic trends--including sustained strong growth, low real interest rates, and high saving rates--provided an environment conducive to increased financial risk-taking. The second part examines macroeconomic policies and the international monetary system, assessing whether too easy monetary policy contributed to asset price bubbles, whether excessive reserve accumulation contributed to a glut of global savings, whether the US dollar's reserve currency status aggravated financial excesses, and whether policies in capital-importing countries were sufficiently countercyclical. We do not find a single factor that can explain the crisis and account for differences in countries' experiences leading up to it; instead, the contribution of macroeconomic policy choices seems complex and ambiguous. However, there are still important policy lessons for, in particular, rebalancing economies away from export-dominated growth and having monetary policy place greater weight on macrofinancial stability. Copyright 2009, Oxford University Press.
Year of publication: |
2009
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Authors: | Faruqee, Hamid ; Scott, Alasdair ; Tamirisa, Natalia |
Published in: |
Oxford Review of Economic Policy. - Oxford University Press. - Vol. 25.2009, 4, p. 553-580
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Publisher: |
Oxford University Press |
Saved in:
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