The global financial crisis has generated a vigorous debate about the relevance of mainstream economics for understanding the real world.
One view is that a new economic model is needed and a half century of economic knowledge must be discarded. An alternative more positive view is that our current economic models work reasonably well and what has occurred is a major unexpected shock.
In the latter case, although the shocks are difficult to predict, the adjustment to the shocks and the required policy interventions can be analysed and understood using more conventional approaches.
Professor Warwick McKibbin explores how well the global financial crisis can be understood as a series of unexpected shocks, what these shocks were and how can conventional economic models explain the global adjustment and the implications of alternative policy responses.
Professor Warwick McKibbin is a Professorial Fellow at the Lowy Institute for International Policy. He is also Director of the Centre of Applied Macroeconomic Analysis (CAMA) in the College of Business and Economics at the Australian National University. He is also a non-resident Senior Fellow at the Brookings Institution in Washington, DC, and President of McKibbin Software Group. He is a member of the Board of the Reserve Bank of Australia.
Professor McKibbin has worked at the Reserve Bank of Australia, the Japanese Ministry of Finance, the US Congressional Budget Office and the World Bank. He has been a consultant for many international agencies and a range of governments on issues of macroeconomic policy, international trade and finance, and greenhouse policy issues.
Professor McKibbin has published widely in technical journals and the popular press including the book Global Linkages: Macroeconomic Interdependence and Cooperation in the World Economy written with Professor Jeffrey Sachs of Harvard University and Climate Change Policy After Kyoto: A Blueprint for a Realistic Approach with Professor Peter Wilcoxen of Syracuse University .
Professor Warwick McKibbin singles out a lack of confidence in the market as the central factor contributing to the global financial crisis. He says policy designed to mend the down turn must be geared towards boosting investor confidence, not injecting politics.