Friday, June 12, 2015

What Can Government Do To Limit Financial Risk?

The financial crisis caused the most serious recession since the Great Depression.  Curiously, the financial system was absent from the prevailing models of the macro economy prior to the Great Recession.  The IMF conference in April made an effort to determine what was learned from the financial crisis and how we might prevent the next crisis.  Noah Smith reviews some of the issues discussed during the IMF conference and he concludes that we are long way from understanding what can be done to prevent the next crisis.  On the other hand, we no longer believe that we can model the economy without including the financial system in our models.

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