Summary of Macroeconomic Management When Policy Space Is Constrained

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A lot has improved since the dark days of the 2008–2009 financial crisis, but many economies are still lagging far behind their potential output. Subdued interest rates and inflation underline the fragility of growth, while stubbornly high deficits inhibit fiscal policy. Economists Vitor Gaspar, Maurice Obstfeld and Ratna Sahay of the International Monetary Fund point out that despite these challenges, things are not as gloomy as they might seem. getAbstract recommends this technical, big-picture analysis of how the world economy can still return to robust growth and even ride out unexpected crises to economists, investors and executives.

In this summary, you will learn

  • How governments can increase the efficacy of their economic policies;
  • Why combining fiscal, monetary and structural plans can revive growth; and
  • Why international cooperation can reinforce domestic policies.

About the Authors

Vitor Gaspar and Ratna Sahay are economists at the International Monetary Fund. Maurice Obstfeld is an economics professor at the University of California, Berkeley, and the IMF’s chief economist.



The international stimulus of 2009–2010 brought the world economy out of a sharp recession, but since then, many governments have focused less on growth and more on public debt levels. This approach has left unemployment unnaturally high, inflation lower than economists’ targets and GDP less than its potential. A widespread feeling persists that monetary conditions and fiscal imbalances leave little room to respond to new shocks. The solution is for governments to implement “comprehensive, consistent and ...

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