IMF Floats Plan To Raise Targets For Inflation |
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February 12, 2010
International Monetary Fund economists are challenging economic orthodoxy today by suggesting that many pre-crisis policy tools should be redesigned and some sacred cows considered for slaughter.
International Monetary Fund economists arechallenging economic orthodoxy today by suggesting that many pre-crisis policy tools should be redesigned and some sacred cows considered for slaughter.
A staff paper co-authored by Olivier Blanchard, IMF chief economist, says the financial and economic crisis has "exposed flaws in the pre-crisis policy framework" and "forces us to think about the architecture of post-crisis macroeconomic policy".
Suggestions include raising inflation targets from about 2 per cent to about 4 per cent so that monetary policy can better respond to shocks; automatic lump-sum payments for poorer families if unemployment rises above certain thresholds; exchange-rate intervention for smaller economies that depend heavily on trade; and giving central banks huge new regulatory tools so they can smooth the path of the economy.
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