Insights Blog

Are Central Banks Prepared for the Next Recession?

July 23, 2019

SCEPA economists worked with the IMF’s Independent Evaluation Office (IEO) on their June 2019 evaluation of the IMF’s advice on unconventional monetary policies.  

The report evaluates the IMF’s advice to the countries that initiated unconventional monetary policies (UMP) and to countries—particularly emerging markets—affected by spillovers from such policies. In addition to providing an overall evaluation of the UMP, the report also reviews the impact of UMP on financial instability and income and wealth distribution.

A highlight of the report is Chapter 7’s “Frontier Central Banking Issues,” which asks if central banks are prepared for the next recession. The evaluation looks at the efficacy of specific monetary measures taken in the past recession, their side effects, and evaluates what tools will be helpful in the next recession, which is likely to come soon.

The report makes concrete recommendations to build the IMF’s expertise on monetary matters, credit cycles, international spillover effects, financial instability, side effects such as inequality, and other steps to raise the capacity to provide timely advice in the future on this core area of the IMF’s work.

The report was prepared using work by Willi Semmler, director of SCEPA’s Economics of Climate Change project and New School Professor of Economics, and Alexander Haider, New School PhD economics student.

About SCEPA

SCEPA works to focus the public economics debate on the role government can and should play in the real productive economy - that of business, management, and labor - to raise living standards, create economic security, and attain full employment.