1. ECONOMIC DOCTRINES & POLICY Some concluding questions/comments 1. Why do we hold the views on economic policies that we hold? 2. Are economic policy questions consensual or controversial, why? 3. Are economic policies important for what happens in the economy? 4. What are the main forces shaping actual policies? 5. Are decision makers always fighting the last war? 6. What are the reactions if results of policies differ from expectations? 7. Can economic policy be seen as a learning process (with progress)? 1

2. The mainstream macroeconomic policy doctrine today some open questions Monetary policy  Price stability the only objective; how about unemployment or growth (if the ’divine coincidence’ does not hold)  How about asset markets and asset price inflation?  The ’zero lower bound’ (ZLB) Fiscal policy  Are automatic stabilizers all you need?  Are the fiscal policy multipliers big or small, how do they vary with circumstances (ZLB or not, recession or not, liquidity constraints, debt levels, openness…)  What is a ’prudent’ government debt level (keeping the risk of a government debt crisis at a low level)?  What is the appropriate pace of fiscal consolidation when the economy is weak? 2

3. Cont. Macroprudential supervision  What weight should policy makers give to ’systemic’ risks, developments that might undermine stability of the financial system?  Is it possible, if so how, to identify systemic risks before they materialize?  What are or should be the specific instruments for dealing with systemic risks; should the central bank ’lean against the wind’ in its monetary policy in the sense of raising interest rates somewhat when asset prices are high/rising?  How should one organize regulation, supervision and crisis resolution of financial institutions nationally and in the euro area?  Can the ’too big to fail’ issue be resolved?  What institutional framework is needed to ensure economic and financial stability in EMU; are the required reforms politically feasible? 3

4. ECONOMIC DOCTRINES AND ECONOMIC POLICY 1.INTRODUCTION - seven questions and some attempts at answers (in the last chapter) 2. SOME CONCEPTUAL CLARIFICATION - economic policy as a process - what is an economic doctrine (as different from theory or analysis) - the concept of economic policy, crisis 3.POLITICAL FOUNDATIONS OF THE MARKET ECONOMY - the idea of the social contract - what does Nogales tell us? - institutional requirements of society according to Fukuyama 4. ETHICAL BASIS OF ECONOMIC POLICY - Some key objectives of economic policy - difference between utilitarian happiness and Paretian efficiency - equity according to John Rawls - what is ’market failure’ and what is ’political failure’? 4

5. Cont. 5. PRE-CLASSICAL ECONOMICS - Aristotle on the profit motive - the mercantilists 6.CLASSICAL ECONOMICS - the labor theory of value - the long-term future of capitalism according to classical economists - explain the ’invisible hand’ - what is the price-specie flow mechanism - the role of the state according to classical economics 7.NEOCLASSICAL ECONOMICS - what was the ’marginalist revolution’? - the contribution to economics of Leon Walras - a simple benchmark model of classical economics (as set out by John Hicks) 5

6. Cont. 8. THE CLASSICAL/NEOCLASSICAL ECONOMIC POLICY DOCTRINE - the market economy as a self-regulating system - laissez faire and its limits in the classical/neoclassical doctrine - neutrality of money - classical/neoclassical views on budget policy 9.THE GREAT DEPRESSION AND THE GOLD STANDARD - the gold standard before and after WWII - the great depression: when did it start, when did it end? - aspects of the deflationary process - the role of monetary policy (or economic policy) in the great depression 10.THE KEYNESIAN REVOLUTION - the role of aggregate demand for Keynes (as compared to the Classics) - explain the ’multiplier’ - interest rate determination in the Keynesian model (compared to Classics) - is wage rigidity the cause of unemployment for Keynes? - a simple benchmark Keynesian macromodel - Keynesianism and the role of government 6

7. Cont. 12.FINLAND: ECONOMIC DOCTRINES 1945 – 1990 - why was Keynesianism not embraced in Finland after WWII? - essentials of the Finnish ’accumulation doctrine’ - the ’devaluation cycle’ X. THE GREAT INFLATION AND MONETARISM - what was the problem with the Phillips-curve? - Friedmans view on the relation between unemployment and inflation - the essentials of monetarism as a policy doctrine - the legacy of Milton Friedman and his monetarism 12B. FINLAND: THE EXCHANGE RATE AS AN ANCHOR OF POLICY - the (changing) role of the echange rate in Finnish economic policy up until 1990 13. FINLAND: THE BIG DEPRESSION IN THE 1990s - how can the depression be concisely characterized? - the causes of the depression (the three ’bads’) - policy lessons of the big depression in Finland in the 199s 7

8. Cont. 15. THE GREAT MODERATION AND THE GLOBAL FINANCIAL CRISIS - explain what is meant by the great moderation - the policy views associated with the great moderation - the main causes of the global financial crisis? - what is meant by the ’savings glut’? - what is or was ’subprime lending’? - some main consequences of the global financial crisis - policies in the US and Europe in response to the global financial crisis - policy lessons from the global financial crisis 16.EMU: ECONOMIC AND MONETARY UNION - how come that EMU was initiated and set up? - explain the impossible trinity - main elements of the institutional set-up of EMU (according to the Maastricht treaty) - main institutional features of the European Central Bank - differences between developments in the euroa area as between its first and second decade - the role of adjustment polices and financial support packages in dealing with the crisis - explain the problem of high leverage - some channels of cross-border spillovers of banking problems - government indebtedness (debt/GDP) tends to increase in recession and is difficult to reduce; why? 8

9. Cont. - what are the main building blocks of the banking union? - trilemma and the banking union - is the EU setting up a fiscal union, meaning what? - fiscal unon requires political union? - difficulties associated with fiscal/political union in the EU or EMU - some potential problems of ’Grexit’ ( a Greek exit from EMU) - EMU: what went wrong? - EMU experiences: what are the lessons? XX. ECONOMIC DOCTRINES AND POLICY: CONCLUDING COMMENTS - are economic doctrines shaped by the specific context in which they originate, examples? - some main dividing lines in economic doctrines - economic doctrines: some reasons for disagreements - influences on economic policy: science, ideology or interests? - policy makers tend to fight the last war; examples - mainstream views on monetary policy today - mainstream views on fiscal policy today - mainstream views on macroprudential supervision 9