The future of policy modelling

William White contributed to the opening panel of the 25th Central Bank Macroeconomic Modelling Workshop, which took place from 9-11 November. In his remarks, White said he would evaluate recent developments in modelling from a particular perspective: namely, that economies were complex, adaptive systems with associated properties. From this perspective, he concluded that many recent developments (recognition of uncertainty and non-linearities, more reliance on scenarios than forecasts etc.) would improve the conduct of monetary policy. In contrast, White identified some neglected areas (supply side developments, the possibility of financial instability etc.) that needed to be more closely integrated into models and the monetary policy framework. His written notes and the recording are available below




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“The Fed’s Big Inflation Fight”

William White participated in a panel, organized by the American Enterprise Institute, that also included Don Kohn and Kevin Warsh (both ex Fed) and Desmond Lachman of the AEI. White expressed concern about a plausible future combination of negative supply shocks and a strong need for increased investment. These two could only be combined, without more inflation, if consumption could be reduced to free up resources. Fiscal restraint, especially higher taxes, seemed a better instrument for reducing consumption than monetary restraint, especially given the current fragility of the financial system. However, in the current political climate, tax increases seem unlikely.

White’s speaking notes and the video can be found below.




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What next for the global economy: Could negative supply shocks disrupt other fragile systems?

William White made the opening presentation at an international conference which took place in Reykjavik, Iceland on 1-2 September. Borrowing from earlier presentations, White suggested that realizing the joint objectives of sustainable, inclusive growth in  a free society required each of a variety of interdependent systems to function well. He worried in particular that negative supply shocks could cause global economic problems that might well pose dangers to democratic political systems that were already showing worrisome signs of instability.



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Negative Supply Shocks: Can our Fragile Democracies Take the Hit?

William White made a presentation on  May 3 at the Institute for International Economic Policy at George Washington University in Washington DC. He contended that the global economic and financial system has been showing increasing signs of stress for many years, raising the likelihood of harmful “tipping points”. In large part, this has been due to the unintended consequences of well-meaning macroeconomic and regulatory policies. Now we must also confront negative supply shocks that will lower real growth and exacerbate inflationary tendencies over a number of years. Unfortunately, over recent years, many democratic countries have also developed political “fault lines” that could now threaten the future of democracy itself. Since history provides many examples of political regime change –  triggered by environmental crises, pandemics, and above all economic and financial crises – there are legitimate reasons for concern.




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The Weaponisation of Finance and the Future of the International Monetary System

On 20 April, 2022, William White and Barry Eichengreen discussed this topic on a webinar organized by the C D Howe Institute in Toronto, Canada.  William White suggested there are many indictors that a global economic and financial crisis could be coming quite soon. He also suggested that such a development, unlike the early days of the crisis that began in 2008, might be more likely to spark a dollar crisis as well. Absent such a dollar crisis, the current international monetary (non) system based primarily on the dollar was likely to continue, though a gradual shift to a tripartite block of national currencies (the dollar, euro and renmimbi) could also be envisaged.  Should a dollar crisis erupt, a variety of outcomes could be anticipated. At one end of the spectrum would be a cooperatively agreed new system, based on some internationally issued money or commodity, that would rectify shortcomings in the current system. At the other end of the spectrum would be an autarchic outcome that would have severe economic, political and even environmental implications.

To see the recording of William White’s presentation use the password Finance123


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Unchartered Waters: When Economic Policy Solutions Become the Problem

William White made a webinar presentation to the Global Risk Institute in Toronto on 3 March 2022. He described how the longer rum implications of policies, above all monetary policy, intended to mitigate shorter run problems  in the economy could cause even worse problems over time. This reality is attested to by numerous signs of stress in the current economic and financial system which could now easily spread over to other systems (political, environmental and public health) as well. White listed seven reasons for expecting a stagflationary future, with equally plausible arguments for subsequent high inflation or a debt-deflation. He raised the possibility that highly indebted governments, given such difficult circumstances, might turn to “financial repression” as the easiest way out.

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Time for a Total Reset? Spillover Problems in Complex Systems,

On 26 February, 2022, William White made a webinar presentation to the Oxford Forum for International Development at Oxford University. He emphasized that the pursuit of sustainable and inclusive growth in free societies rests on the efficient functioning of underlying systems; in particular our economic/financial, political, environmental and public health systems. Unfortunately each of those systems is currently under stress and those stresses seem likely to grow with time. To get off the current “bad path”, White argued we need clarity about what achievable, alternative systems might look like and the practical steps needed to get “there” from “here”.


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Monetary Policy and the “Everything” Asset Price Bubble

William White participated in a panel discussion at the American Enterprise Institute on November 12th.  In his prepared presentation (from 48 minute mark), White suggested that the economies of the advanced countries  were on an ever narrowing path, with high inflation threatening on one side and  a dangerous deflation on the other.  Central banks had inadvertently contributed to this growing exposure  through the pursuit of policies that were generally unnecessary, increasingly ineffective and ultimately dangerous.  White felt that the root cause was the failure of central banks to recognize the essential nature of a modern economy; it is complex and adaptive, not simple and static. When asked how similar mistakes might be avoided in the future, White provided a number of practical suggestions. However, before “building back better” we need to recognize the damage left over from the previous regime. It would be best to deal with the overhang of unserviceable debt through explicit debt restructuring.

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The Inauguration of GENESYS (Government Economists for New Economic Systems)

The NAEC group at the OECD  inaugurated on 4 November a new international network of government officials to question conventional approaches to policy making. William White participated in an inaugural panel chaired by Rana Foroohar (of the Financial Times) and Jo Swinson (previous leader of the Liberal Democratic Party in the UK). White (1 hour, 2 minutes in) highlighted the problem of groupthink in government and the unwillingness of many to “speak truth to power”. This new network could encourage individuals in national capitals to speak out, knowing that their views were shared by others, and could also be an independent source of new ideas within governments. White finished by noting that there were many false beliefs about how the economy works that needed to be challenged.

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Hopes and Ambitions for Key Sustainability Objectives in 2030

At the 2021 AGM of the Council on Economic Polices, William White introduced a discussion of how central banks and financial regulators might contribute more concretely to meeting sustainability objectives both within the financial sector and in other systems. He described what a more “ideal” financial system might look like, and discussed some of the impediments to getting there from where we are now.

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