Getting Back on Track: Macroeconomic Policy Lessons from the Financial Crisis

This article reviews the role of monetary and fiscal policy in the financial crisis and draws lessons for future macroeconomic policy. It shows that policy deviated from what had worked well in the previous two decades by becoming more interventionist, less rules-based, and less predictable. The policy implications are thus that policy should "get back on track." The article is a modified version of a presentation given at the Federal Reserve Bank of Philadelphia's policy forum "Policy Lessons from the Economic and Financial Crisis," December 4, 2009. The presentation was made during a panel discussion that also included James Bullard and N. Gregory Mankiw.