PORT OF SPAIN, Trinidad - The financial crisis of 2008 and the ensuing economic challenges for many of the major economies have provided a lot of lessons for economists and those interested in political economy. Whilst we may all be aware of the difficulties posed by a recession, what has not been clear is the success of the various policy measures to lift a country out of the doldrums.
Depending on the country's position, both monetary and fiscal measures have been used in combination. In many of the major economies, monetary policy has been expansionary: interest rates are at record lows (virtually zero) and quantitative easing (printing money) has been employed and inflation mitigation abandoned. Implementation of a regulatory standard, Basle III, which will again increase capital ratios and liquidity guidelines, has been delayed (to 2019) as bank balance sheets have been weakened by the recession. Strengthening bank capital ratios at this time would have resulted in freezing bank lending, at a time when many businesses needed finance.