Blanchard: Looking Forward, Looking Back

IMF Chief Economist Blanchard to step down end September

Financial crisis raises potential existential crisis for macroeconomics

Need to address longer term issues of low productivity growth, increasing inequality

He will join the Peterson Institute for International Economics in October as the first C. Fred Bergsten senior fellow, a post named for the founder of the influential 35-year-old, Washington-based think tank.

When French-born Blanchard, a former chairman of the economics department at the Massachusetts Institute of Technology, joined the IMF on September 1, 2008, little did he realize that he would be at the center of a global economic storm. Two weeks later, Lehman Brother’s bank collapsed, marking what many consider the start of the 2008-09 global financial crisis.

“The crisis was a traumatic event during which we all had to question many cherished beliefs,” said Blanchard. This included questioning various assumptions on the role of fiscal policy, including the size of fiscal multipliers, the use of unconventional monetary policy measures and macroprudential tools, capital flows and measures to control them, labor market policies and the role of micro and macro flexibility. “And being in a position to question gave me the opportunity to make a difference,” he said.

Blanchard says he now wants to take the time to research fewer issues more intensely.

“For the past seven years, he says “I’ve been answering a thousand questions, but not in a very deep way. I want to take ten of these thousand questions and answer them more deeply.” One of the issues he plans to examine is the various measures countries can use to control and mold capital flows.

IMF Survey interviewed Blanchard about global economic issues, the IMF's role in furthering economic and financial stability, and what it was like to be in the hot-seat job of chief economist.

IMF Survey: You have at times pushed the envelope of IMF thinking and policy positions. How has this been received inside and outside the IMF?

Blanchard: It would have been intellectually irresponsible, and politically unwise, to pretend that the crisis did not change our views about the way the economy works. Credibility would have been lost. So, rethinking, or pushing the envelope was not a choice, but a necessity.

The fact that the economic counsellor, or the research department, has a view on a particular topic does not move things very much by itself. An essential part of the...