VoxEU Webcast
What Can Central Banks Do?
Markets don't work perfectly and stabilisation policies by governments and central banks are crucial. In her research, Stephanie Schmitt-Grohé looked at different policy options to address the unemployment crisis that hit in many countries as a result of the economic shock from the financial crisis of 2007-08. One solution was to better regulate capital inflows: moderate wage growth in the boom years would have helped ameliorate the unemployment problem of the subsequent crisis.
