Author: Kevin O’Rourke

Blanchard on macroeconomic policy

There is an extensive interview with Olivier Blanchard on the IMF website, and a link to his recent paper on the future of macroeconomic policy making (co-authored with Giovanni Dell’Ariccia and Paolo Mairo), here. I can see this one ending up on lots of undergraduate reading lists.

Update: Krugman likes the paper, which makes sense. He alo cites a completely different argument in favour of moderate levels of inflation, which made quite a splash a few years ago: given that it is hard to cut nominal wages, inflation can be very useful in lowering real wages, when that is what is required.

Real wage reductions are required in Ireland, but nominal wage reductions remain elusive here, despite the spin. Can anyone doubt that Irish real wage adjustment would be easier if we could rely on higher inflation rates to do the bulk of the work?

Even more on Greece

Courtesy of Eurointelligence, here is a French take on what is happening.

Update: Tony Barber has a blog entry on Thursday’s summit here.

Escaping the lion

The news that Italian bank Unicredit is insisting that Ireland rather than Italy is the ‘I’ in PIGS should hardly come as a surprise. All the PIIGS are at it these days: thus Emilio Botin of Santander is quoted in the FT as saying that “Comparing Spain to Greece is like comparing Real Madrid to Alcoyano”. (Alcoyano is apparently a club in the Spanish second division.) And we have been busily distancing ourselves from everyone else as well.

All this is understandable. As Ken Rogoff puts it,

There is an old joke about two men who are trapped by a lion in the jungle after a plane crash. When the first of them starts putting on his sneakers, the other asks why. The first answers: “I am getting ready to make a run for it.” But you cannot outrun a lion, says the other man, to which the first replies: “I don’t have to outrun the lion. I just have to outrun you.”

However, one of the big lessons of history is that lions rarely make do with just one snack: when defaults come, they come in waves. The 1930s is a good case in point.

Europe needs solidarity, not finger pointing.

Chilean lessons

Jeff Frankel has a piece on what Chile can teach the rest of the world here. The Irish fiscal debate could usefully move in this direction. The piece is also relevant to the thread below on economic expertise, and to broader debates about whether technical expertise in general is useful to policy making, and is sufficiently appreciated and availed of in Ireland.

Security and trade

Gideon Rachman has an article on this topic in today’s FT, available here.