Global crisis

Charles Calomiris, Marc Flandreau, Luc Laeven, 19 September 2016

The Global Crisis has raised concerns over how far ‘lender of last resort’ policies by central banks should go. This column examines the history of the development of these policies throughout the world. Last resort lending is a locus of political power, and as such, its creation should be viewed as the outcome of a political bargain. It is therefore not surprising that countries differed in their propensity to create such policies, and in the powers with which they chose to endow them.

Julian Kozlowski, Laura Veldkamp, Venky Venkateswaran, 11 September 2016

The Great Recession has had long-lasting effects on credit markets, employment, and output. This column combines a model with macroeconomic data to measure how the recession has changed beliefs about the possibility of future crises. According to the model, the estimated change in sentiment correlates with economic activity. A short-lived financial crisis can trigger long-lived shifts in expectations, which in turn can trigger secular stagnation.

Roger Farmer, Konstantin Platonov, 02 September 2016

The concept of 'secular stagnation' asserts that unemployment remains high and output below potential because investors are pessimistic. This column presents a way to rethink the IS-LM model to include investor expectations. This 'IS-LM-NAC' model explains the slow recovery from the Great Recession, provides a theory-consistent explanation for secular stagnation, and suggests policy options to escape it.

Laurence Ball, 24 August 2016

Much of the damage from the Great Recession is attributed to the Federal Reserve’s failure to rescue Lehman Brothers when it hit troubled waters in September 2008. It has been argued that the Fed’s decision was based on legal constraints. This column questions that view, arguing that the Fed did have the legal authority to save Lehman, but it did not do so due to political considerations.

Stefano Scarpetta, Mark Keese, Paul Swaim, 25 July 2016

The labour market recovery in OECD countries has been steady but slow since the Great Recession. More worrying is the fate of wage growth over the same period. This column assesses the implications of stagnation in the labour market for growth, wages, and inequality. It finds that structural weaknesses in labour market performance have become more visible as markets recover from the Great Recession. The policy response must include macroeconomic policies aimed at strengthening investment, and structural policies to support growth while nudging workers towards higher-skilled jobs.

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