Olivier Blanchard doesn’t exactly say *where* the dark corners are, but argues – quite correctly in my view – that the main objective of macro policy should be to stay away from them. The piece is a concise overview of how developments within the economic profession (read rational expectations) and in the economy itself (read Great Moderation) have corroborated to the macro policy world view prior to the 2008 crisis, and how the crisis has changed the view.
The piece is worth reading in full. A nice passage is on financial regulation: “The reality of financial regulation is that new rules open new avenues for regulatory arbitrage, as institutions find loopholes in regulations. That in turn forces authorities to institute new regulations in an ongoing cat-and-mouse game (between a very adroit mouse and a less nimble cat).”
Fabian Gunzinger 