At the ZEW Research Seminar Prof. Volker Wieland, PhD, Talked about Proposals for Policy Analysis after the Financial Crisis

At the end of January a special highlight marked ZEW's research seminar. Prof. Volker Wieland, PhD, from Frankfurt University gave a talk about new proposals for policy analysis after the financial and economic crisis

At the beginning of his talk, Wieland described the media's current criticism of macroeconomics, which accuses economists of not having predicted the financial crisis and suggests that the general equilibrium models applied are unrealistic. Furthermore, Wieland mentioned Krugman's and Buiter’s opinion that modern macroeconomics appears to be ineffectual.

As an answer to this criticism, Wieland presented his view on how the robustness of macroeconomic policy analysis could be improved after the financial crisis. The core element of his proposal is the development of an internet platform that uses different models and thereby makes it possible to conduct extensive model comparisons via different explanatory approaches. The stronger concurrence of the models is intended to lead to more robust policy recommendations and to facilitate the review of research findings. Additionally, dynamic stochastic models of the economy as a whole, including the banking and finance sector as well as deviations from rational expectations, are to be developed further.

Taking the example of the financial crisis, Wieland also showed that current models did not correctly predict the recession but that in comparison, prognoses made by experts had been even less accurate. Wieland pointed out that this fact was surprising, considering that experts could freely chose variables and therefore were more flexible in developing prognoses. Finally, he examined the stimulus packages launched during the financial crisis applying different models and concluded that the effects of the crisis on the German GDP had not lived up to the worst expectations.

Volker Wieland is professor for Monetary Theory and Policy at the Goethe University Frankfurt. Having studied Economics at the University of Wuerzburg, the State University of New York at Albany and the Institute for the World Economy in Kiel, he received a PhD from Stanford University in 1995. Before joining the Frankfurt faculty, Volker Wieland was a senior economist at the Board of Governors of the Federal Reserve System in Washington, DC. In 2008, he was awarded the Wim Duisenberg Research Fellowship by the European Central Bank.

Wieland's research interests include monetary and fiscal policy, business cycles and macroeconomic models. He became well-known, amongst others, for his works on reducing the risks of deflation and a more robust interest rate policy. Furthermore, he is working on the development of a comparative analysis of different macroeconomic models.

Dr. Marcus Kappler, kappler@zew.de

At the ZEW Research Seminar, ZEW researchers as well as external lecturers provide an insight into the current position of selected research areas and research projects. Special highlights of this series are reports of renowned national and international researchers.