The crisis: Policy lessons and policy challenges

We review the competing explanations of the 2007-2008 global crisis, recall how governments around the world had to depart from established policy stances, and reflect on the legacy of the crisis both in terms of future challenges and changes in policy doctrine. The G-20 has addressed important regulatory and macro-financial dimensions of the crisis, but it has left difficult questions unanswered. We review some of these incoming challenges such as moral hazard in the post-bail-out world, the trade-off between financial stability and the cost of capital, the feasibility for central banks to manage their new financial stability mandate, and the effectiveness of peer review to address global imbalances.