325_Supplement9

325_Supplement9 - Department of Economics University of...

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Intermediate Macroeconomic Analysis Spring 2011 1 Department of Economics University of Maryland Economics 325 Intermediate Macroeconomic Analysis Supplement 9 Professor Sanjay Chugh Spring 2011 The following essay, which appeared in the Economist on January 31, 2009 , is written by Olivier Blanchard, an MIT economist and current chief economist of the International Monetary Fund (IMF). The essay offers his views on some of main aspects of the current economic and financial downturn, with a particular focus on the especially heightened state of uncertainty perceived by consumers and firms. This is interpretable in terms of the concepts of “shocks” we will study in Chapter 9; specifically, an increase in “uncertainty” can be thought of as the size or magnitude of the shocks hitting
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Intermediate Macroeconomic Analysis Spring 2011 2 Economics focus (Nearly) nothing to fear but fear itself Jan 29th 2009 From The Economist print edition In a guest article, Olivier Blanchard says that policymakers should focus on reducing uncertainty CRISES feed uncertainty. And uncertainty affects behaviour, which feeds the crisis. Were a magic wand to remove uncertainty, the next few quarters would still be tough (some of the damage cannot be undone), but the crisis would largely go away. From the Vix index of stockmarket volatility (see chart), to the dispersion of growth forecasts, even to the frequency of the word “uncertain” in the press, all the indicators of uncertainty are at or near all-time highs. What is at work is not only
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This document was uploaded on 11/01/2011 for the course ECON 325 at Maryland.

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325_Supplement9 - Department of Economics University of...

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