There is a quiet revolution underway in macroeconomics.
The old orthodoxy – the “Washington consensus” – is being deserted by leading economists in response to the Global Financial Crisis.
For me the turning point was last month when the IMF published a challenging article by its Chief Economist Olivier Blanchard and others, that calls time out on the old orthodoxy.
Although much debated because of its suggestion around a higher baseline inflation target, it is much broader in its critique of the failed status quo and directions for change.
If you have’t read it, see it here: http://blog-imfdirect.imf.org/2010/02/12/imf-draws-lessons-from-the-crisis-reviews-macro-policy-framework/
For further comment see:
http://macroblog.typepad.com/macroblog/2010/02/do-we-need-to-rethink-macroeconomic-policy.html
http://www.economist.com/blogs/freeexchange/2010/02/monetary_policy_2
I will be writing more about the IMF change of direction, the breakdown of the consensus and what it might mean for us.
We live in exciting times. The current government is now clearly living in the past.
