Before and Beyond the Global Economic Crisis

Before and Beyond the Global Economic Crisis

Economics, Politics and Settlement

Edited by Mats Benner

This timely and far-reaching book addresses the long-term impact of the recent global economic crisis. New light is shed on the crisis and its historical roots, and resolutions for a more robust, resilient future socio-economic model are prescribed.

Chapter 4: Macroeconomics after the crisis: bringing finance back in

Robert Boyer

Subjects: economics and finance, economic psychology, political economy, politics and public policy, european politics and policy, political economy

Extract

As time has passed since September 2008, the costs, the severity and the uncertainty about the way out of the present crisis have been clearly recognized by every analyst and observer. Reference to the Great Depression has become more and more frequent, since the macroeconomic patterns observed do not fit with the post-Second-World-War typical business cycles. This is a matter of concern not only for policymakers but also for financial economists as well as macroeconomists. According to the modelling of risk by the former, a financial crash of this amplitude was supposed to happen with only an infinitesimal probability. The macroeconomic basic model elaborated by central banks was used to analyse the impact of interest rate policy directly upon the real economy without any intermediation via the financial system. After a few years of benign neglect by economists, the pressure of policymakers as well as informed public opinion, the profession has now to recognize that ‘Something may well have gone wrong.’

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