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