Macroeconomics After the Great Recession

cl2Opening Remarks by IMF Managing Director Christine Lagarde at the Seventeenth Jacques Polak Annual Research Conference

November 3, 2016

Good morning. I am delighted to welcome you to the IMF’s 17th Jacques Polak Annual Research Conference.


Our annual event is by now one of the most important forums for macroeconomic researchers and policy makers to get together and exchange ideas on the world’s major economic challenges.

The Research Department has again put together a program that is intellectually rich and provides ample topics for rigorous debate.

And I am very pleased about the high-caliber line up of speakers and discussants. Thank you for joining us today, and thank you to our organizers who put the program together.

The theme of this year’s conference is “Macroeconomics After the Great Recession.”

It has now been eight years since the outbreak of the global financial crisis, and all of us will agree that the road to recovery has been anything but easy.

The crisis challenged the existing macroeconomic models, especially on how to properly integrate financial sector developments, and exposed limits to our knowledge of how the economy functions.

A lot of work has gone into to rethinking our economic theories, and in how to get our economies back to work. Yet, we are far from reaching a consensus on many issues:

  • How to stimulate growth and boost productivity?
  • How to make countries more resilient to financial shocks?
  • How to ensure that globalization works for all?

And so on. I am sure you will have other questions to add to this list.

Honoring Olivier

With this in mind, it is not a coincidence that this year’s conference is in honor of Olivier Blanchard—who in his seven-year tenure as the IMF’s Economic Counsellor and Director of Research Department pushed the frontiers of economic thinking both within and outside the Fund.

After an outlandishly successful academic career that began at Harvard University and continued at MIT, Olivier joined the Fund on September 1, 2008.

When policymakers around the world scrambled to contain the impact of the crisis, they turned first and foremost to the IMF for advice.

They came to the right place—Olivier provided us with the intellectual leadership to be ahead of the curve—asking and seeking answers to new, challenging policy questions.

Whether it was the issue of capital controls to manage volatile capital flows, the role of fiscal policy and the size of fiscal multipliers, or whether central banks should target higher inflation rates, Olivier took on controversial but important topics head on, and opened the Fund—as well as the wider academic and policymaking community—to new ideas.

It was in this spirit, Olivier, that you organized three “Rethinking Macroeconomics” conferences during your tenure at the Fund, providing a forum for researchers and policy makers to distill the lessons of the global financial crisis, and debate policy recommendations going forward.

Olivier, as you can see, even if the theme of this year’s conference is slightly different, it is still very much in line with your original thinking.

Although we are not yet ready to forge a consensus on the new macro policy framework, this year’s conference will help us move further in that direction. I cannot think of a better way to celebrate your many contributions than this conference with this outstanding cast of speakers.


The program of the conference has been arranged into three areas that closely relate to Olivier’s lifelong research agenda, as well as to the research program we pursue at the Fund.

And following his rigorous research tradition, adopted by the many of you who have studied or worked with him, the papers in the program feature many new techniques, and a healthy mix of empirical and theoretical approaches.

The first area is the changing framework of monetary and exchange rate policies. While most of us believe that the unconventional monetary policies adopted by major central banks have helped to prop up the advanced economies, their effectiveness has not remained unchallenged.

Indeed, the cross-border spillovers of these policies have been a subject of much debate. The Fund has, of course, been actively engaged here, including on how to manage any resulting capital flow volatility.

Under Olivier’s leadership, the Research Department worked closely with other departments to form our so-called institutional view on capital flows, which acknowledges that capital controls—previously considered a “taboo” subject, especially in mainstream economic circles—could play a useful role in some circumstances.

Second , the conference program also explores the effects of fiscal policy on output. Fiscal policy is a core area of the Fund’s work and policy advice; and work on the topic has spanned a wide range of issues—from assessing fiscal space to the use of fiscal policy for aggregate demand management, mitigating climate change, and lessening inequality.

Olivier’s own research on fiscal multipliers created quite a stir four years ago. His finding that fiscal multipliers had been underestimated in previous research, and could be much larger in recession-hit economies—or when monetary policy was constrained by the zero lower bound—had profound implications for Fund’s policy design.

There surely remains room for further understanding of the macroeconomic impact of fiscal policies, what constitutes safe debt levels, and how quickly to return to safe debt levels without damaging growth. I’m confident that the conference papers will add to our knowledge on these important issues.

The third area is structural reforms and labor market policies. Securing sustainable and inclusive growth across countries has been a key priority of the IMF’s work program.

In recent years, the Fund has produced a considerable amount of research supporting the case for inclusive growth policies.

Under Olivier, the Research Department took the lead in initiating this line of research at the Fund, which helped to broaden our understanding of the causes of inequality and its consequence for growth, as well as the related impact of labor market reforms.

I am pleased to see that several papers in the program are along these lines, and explore how to boost employment and productivity—topics on which the Fund continues to have an active research program.

Adding to an excellent set of papers, we then will have a chance to hear Larry Summers deliver the Mundell-Fleming Lecture this afternoon, where he will talk about “Macroeconomic Policy and Secular Stagnation.”

And finally, the Economic Forum, tomorrow afternoon, will feature an excellent group of panelists, moderated by our own Maurice Obstfeld, discussing policy challenges after the Great Recession. I am sure both discussions will give us new insights and much food for thought.


Let me close with a few personal words. As you know, besides being an exceptional researcher and intellectual leader, Olivier has been a dear friend, colleague, and mentor to me, many of us, and many of our younger colleagues at the Fund. He has been called by colleagues as the “economist’s economist.”

Honoring Olivier’s lifelong dedication to teaching, mentoring, and supervising the work of young economists, last year we commenced an “ Olivier Blanchard Internship Award” – whose first winner will be announced soon – to recognize outstanding research talents among young summer interns at the IMF’s Research Department.

In that sense, the world has done a 180–degree turn. A few decades ago, Olivier advised David Lipton—who was at that time a Harvard PhD student in the job market—that “if you go to the IMF, you will be throwing your career away.”

And now you are helping us to attract young talent in your name, Olivier! Thank you for everything, and nobody should say economists don’t change their ways of thinking!

I wish you all the best for the conference!