The Global Economy Seven Years after the Financial Crisis: Vulnerabilities and Policy Issues

The David Finch Lecture 2015

Following the global financial crisis of 2008, most advanced economies went into a protracted economic slump, coupled with a historic private debt overhang and rapidly mounting public debts. Meanwhile, most emerging markets flourished and attracted sizable capital inflows, helped by rapid growth in China, buoyant commodity prices, and extremely low and stable international interest rates.

Seven years on, many advanced economies in Europe have barely begun to recover and deflationary challenges have emerged. The favourable global environment has taken a turn for the worse, as commodity prices have declined and the strengthening US dollar has raised debt servicing burdens for many emerging markets.

This talk places the current global situation in a broad historical context, discussing the main policy challenges faced by advanced and emerging economies and distilling historical lessons on what the end game may bring.

Carmen Reinhart is the Minos A. Zombanakis Professor of the International Financial System at Harvard Kennedy School.