Reform the macroeconomic policy framework, don’t abandon it

It now looks likely that the cost – in terms of lost output and jobs – of bringing inflation back to target will be lower in most advanced countries than previously feared. But even as the immediate crisis subsides, there is a growing debate over the policy lessons to be learnt, not just from the inflation shock and the economic handling of the pandemic, but from the entire period since the 2008-9 global financial crisis (GFC).

This reflects advanced countries’ poor economic record over that period, with low and volatile growth accompanied by very low investment and anaemic productivity growth, rising public debt and weak trade growth.

 
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