What Have We Learned?

Macroeconomic Policy after the Crisis

edited by George Akerlof, Olivier Blanchard, David Romer,

and Joseph Stiglitz

V*

The MIT Press

Cambridge, Massachusetts
London, England
 Contents

Introduction: Rethinking Macro Policy II—Gelting Granulär 1

Olivier Blanchard, Giovanni Dell'Ariccia, and Paolo Mauro

Part I: Monetary Policy

1 Many Targets, Many Instruments: Where Do We Stand? 31
Janet L. Vellen
2 Monetary Policy, the Only Game in Town? 37
Lorenzo Bini Smaghi
3 Monetary Policy during the Crisis: From the Depths to the
Heights 45
Mervyn A. King
4 Monetary Policy Targets after the Crisis 55
Michael Woodford

Part II: Macroprudential Policy

5 Macroprudential Policy in Prospect 65
Andrew Haidane
6 Macroprudential Policy and the Financial Cycle: Some Stylized
Facts and Policy Suggestions 71
Claudio Borio
7 Macroprudential Policy in Action: Israel 87
Stanley Fischer
8 Korea's Experiences with Macroprudential Policy 99
Choongsoo Kim
Part III: Financial Regulation
9 Everything the IMF Wanted to Know about Financial Regulation
and Wasn't Afraid to Ask 129
Sheila Bair
10 Regulating Large Financial Institutions 135
Jeremy C. Stein
11 The Contours of Banking and the Future of Its Regulation 143
Jean Tirole
12 Banking Reform in Britain and Europe 155
John Vickers
13 Leverage, Financial Stability, and Deflation 165
Adair Turner

Part IV: Fiscal Policy

14 Defining the Reemerging Role of Fiscal Policy 179
Janice Eberly
15 Fiscal Policy in the Shadow of Debt: Surplus Keynesianism Still
Works 183
Anders Borg
16 Fiscal Policies in Recessions 193
Roberto Perotti
17 Fiscal Policy 209
Nouriel Roubini

Part V: Exchange Rate Arrangements

18 How to Choose an Exchange Rate Arrangement 225
Agusti'n Carstens
19 Rethinking Exchange Rate Regimes after the Crisis 229
Jay C. Shambaugh
20 Exchange Rate Arrangements: Spain and the United
Kingdom 245
Martin Wolf
21 Exchange Rate Arrangements: The Flexible and Fixed Exchange
Rate Debate Revisited 257
Gang Yi
 Contents vii

Part VI: Capital Account Management

22 Capital Account Management: Toward a New Consensus? 265
Duvvuri Subbarao
23 Capital Flows and Capital Account Management 271
Jose De Gregorio
24 Managing Capital Inflows in Brazil 289
Märcio Holland
25 Capital Account Management 307
Helene Rey

Part VII: Conclusions

26 The Cat in the Tree and Further Observations: Rethinking
Macroeconomic Policy II 317
George A. Akerlof
27 Rethinking Macroeconomic Policy 321
Olivier Blanchard
28 Preventing the Next Catastrophe: Where Do We Stand? 327
David Romer
29 The Lessons of the North Atlantic Crisis for Economic Theory and
Policy 335
Joseph E. Stiglitz

Contributors 349
Index 351