Although the aftermath of financial crises is on average grim, there is, in fact, tremendous variation in outcomes across countries and episodes. Some crises, such as Norway’s in the early 1990s, are followed by only small recessions; others, such as Japan’s in the 1990s or Greece’s in the recent episodes, are followed by severe and prolonged economic distress. The lecture will show that monetary and fiscal policy play a critical role in explaining this variation. Having room to cut interest rates without hitting the zero lower bound is beneficial. Having the borrowing capacity to do fiscal stimulus (and actually using it), is enormously valuable. The findings have implications for how policymakers should act both in normal times and during crises.

The Annual Economica Phillips lecture is jointly sponsored by the journal Economica and the Department of Economics.

Christina D. Romer is the Class of 1957 Garff B Wilson Professor of Economics at the University of California, Berkeley and a former Chair of the Council of Economic Advisers in the Obama administration.

Francesco Caselli is Norman Sosnow Professor of Economics at LSE.

The Department of Economics at LSE (@LSEEcon) is one of the largest economics departments in the world. Its size ensures that all areas of economics are strongly represented in both research and teaching.

Economica (@EconomicaLSE) is a Departmental international peer-reviewed academic journal, covering research in all branches of economics. 

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