Thank you for inviting me to speak here today. It is a special honor and pleasure to share the stage with Leszek Balcerowicz. I first met Professor Balcerowicz when he was finance minister in December 1989 here in Warsaw. I had travelled from the United States as part of the United States government economics team at the time. I admired the courage and foresight of Leszek then, and I remain in great admiration today. It is good to be back in Poland and to observe the tremendous progress in 21 years which has been made possible by the important reforms Leszek helped usher through.
Today I want to talk about the recent financial crisis. I started doing research on the financial crisis in 2007 just before the crisis flared up in August of that year. My approach has been empirical. I have not focused on who said what to whom when, however interesting and ultimately important that story is. Rather I look at the timing of events and at data—at interest rates, stock prices, credit flows, money supply, housing starts, income, consumption—using statistical techniques and simple charts, concentrating on what is amenable to economic analysis. I also try to use the discipline of “counterfactuals,” or stating what alternative policies or events would have been and using economic models to examine the impacts. I looked at economic policy throughout the crisis, including the period leading up to the panic in the fall of 2008 and the year and a half since then. What I have found since the start of this research is that 2 government interventions—many well-intentioned government interventions—did a great deal of harm. With these findings in mind, I wrote one of the first books on the crisis, Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis which has now been translated into Polish.
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