Finance

Why is this a surprise?

Today’s Financial Times article: ECB: trick or Trichet (Dec 2)

Is raising required bank capital the answer?

What’s really going on with Europe’s bailout of the Irish Economy

The first thing to say about QE2 is that it is a very different operation from QE1.

The Institute joined DIME and Central European University in hosting a conference addressing a key question of economics today: How can we create a new macroeconomic theory that takes into account the true relationship of finance to the real economy and can more accurately anticipate crises?

Joseph Stiglitz at the Institute’s debut conference in Cambridge, UK (2010).

Presented at the inaugural Conference at King’s College

This paper asks, how empirical evidence does or does not influence economic thinking and theory. In particular, which role do calibration, statistical inference, and structural change play?

The global financial crisis—and the Great Recession that followed—have inflicted tremendous economic and social damage across the world. Thankfully, we now appear to be on the path to recovery—though it remains sluggish and uneven, and in need of continued policy support in many advanced economies.

This paper, which is prepared for the Inagural Conference of the Institute for New Economic Thinking in King’s College, Cambridge, 8-11 April 2010, questions the preeminence of theory over empirics in economics and argues that empirical econometrics needs to be given a more important and independent role in economic analysis, not only to have some confidence in the soundness of our empirical inferences, but to uncover empirical regularities that can serve as a basis for new economic thinking.

The purpose of the paper is to argue for attention to be paid, not only to choice of theory, but also to choice of theoretical approach, in order to address issues posed by the crisis.