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The Mayekawa Lecture: Some Alternative Perspectives on Macroeconomic Theory and Some Policy Implications

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  • William R. White

    (Chairman of the Economic Development and Review Committee of the OECD (E-mail: white.william@sunrise.ch))

Abstract

The macroeconomic theories and models favored by academics, as well as those used more commonly by policymakers, effectively rule out by assumption economic and financial crises of the sort we are living through. (In particular, the longer-run dangers posed by the rapid expansion of credit and resulting private-sector balance-sheet developments are almost wholly ignored.) As a result, the current crisis was neither anticipated nor prepared for, and the crisis was also less well managed than it might have been. At the level of macroeconomic theory and modeling, this experience suggests that basic Keynesian insights need to be complemented by some insights from the Austrian school as well as those of Minsky. (Demand factors are important, but so too are supply-side and financial considerations.) Such a synthesis provides a reasonable explanation of the crisis and points to some of the difficulties likely to be faced in emerging from it. As for the policy implications in current circumstances, it needs to be better recognized that policies with positive short-run effects can have negative effects over a longer time period. If, as a result, fiscal expansion and monetary expansion have now reached their limits in some countries, supply-side policies must be given greater emphasis. (These would include measures to encourage investment, both private and public, as well as other structural measures to raise the potential growth rate of the economy.) Such measures, along with more decisive efforts to reduce the "headwinds" of over-indebtedness, should with time provide the foundations for a sustainable economic recovery.

Suggested Citation

  • William R. White, 2010. "The Mayekawa Lecture: Some Alternative Perspectives on Macroeconomic Theory and Some Policy Implications," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 28, pages 35-58, November.
  • Handle: RePEc:ime:imemes:v:28:y:2010:p:35-58
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    References listed on IDEAS

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    Cited by:

    1. William R. White, 2013. "Is Monetary Policy a Science? The Interaction of Theory and Practice over the Last 50 Years," SUERF 50th Anniversary Volume Chapters, in: Morten Balling & Ernest Gnan (ed.), 50 Years of Money and Finance: Lessons and Challenges, chapter 3, pages 73-116, SUERF - The European Money and Finance Forum.
    2. Piotr Ciżkowicz & Andrzej Rzońca & Andrzej Torój, 2019. "In Search of an Appropriate Lower Bound. The Zero Lower Bound vs. the Positive Lower Bound under Discretion and Commitment," German Economic Review, Verein für Socialpolitik, vol. 20(4), pages 1028-1053, November.
    3. Otmar Issing, 2012. "The Mayekawa Lecture: Central Banks-Paradise Lost," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 30, pages 55-74, November.
    4. Shigenori Shiratsuka & Wataru Takahashi & Yuki Teranishi & Kozo Ueda, 2010. "Future of Central Banking under Globalization: Summary of the 2010 International Conference Organized by the Institute for Monetary and Economic Studies of the Bank of Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 28, pages 1-16, November.
    5. Cukierman, Alex, 2013. "Monetary policy and institutions before, during, and after the global financial crisis," Journal of Financial Stability, Elsevier, vol. 9(3), pages 373-384.
    6. Charles A. E. Goodhart & Dimitrios P. Tsomocos, 2011. "The Role of Default in Macroeconomics," IMES Discussion Paper Series 11-E-23, Institute for Monetary and Economic Studies, Bank of Japan.
    7. Issing, Otmar, 2012. "Central banks: Paradise lost," CFS Working Paper Series 2012/06, Center for Financial Studies (CFS).
    8. Assaf Razin & Steven Rosefielde, 2011. "Currency and Financial Crises of the 1990s and 2000s," CESifo Economic Studies, CESifo Group, vol. 57(3), pages 499-530, September.
    9. W.R. White., 2011. "Summary of the international symposium organised by the Banque de France “What is the appropriate regulatory response to global imbalances?”," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 22, pages 5-18, Summer.
    10. Kazuo Ueda, 2011. "Japan's Bubble, the USA's Bubble and China's Bubble," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 19(1), pages 47-62, January.
    11. Otmar Issing, 2012. "Central Banks - Paradise Lost," IMES Discussion Paper Series 12-E-10, Institute for Monetary and Economic Studies, Bank of Japan.
    12. Kazuo Ueda, 2010. "Japan's Bubble, America's Bubble and China's Bubble," CARF F-Series CARF-F-236, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    13. Sherstnev, Mikhail, 2013. "World economy, economics and economic policy: what emerges after the crisis?," MPRA Paper 49019, University Library of Munich, Germany.
    14. Ioanna Kokores, 2015. "Lean-Against-the-Wind Monetary Policy: The Post-Crisis Shift in the Literature," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 65(3-4), pages 66-99, july-Dece.
    15. Otmar Issing, 2012. "Central Banks - Paradise Lost," IMES Discussion Paper Series 12-E-10, Institute for Monetary and Economic Studies, Bank of Japan.

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    More about this item

    Keywords

    Macroeconomics; Bubble; Financial crisis;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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