Back to the drawing board for macroeconomics

In November 2010, European Central Bank (ECB) the then Governor, Jean-Claude Trichet, opened the ECBs flagship annual Central Banking Conference. He challenged the scientific community to develop radically new approaches to understanding the economy: ‘When the crisis came, the serious limitations of existing economic and financial models immediately became apparent. Macro models failed to predict the crisis and seemed incapable of explaining what was happening to the economy in a convincing manner. As a policy-maker during the crisis, I found the available models of limited help. In fact, I would go further: in the face of the crisis, we felt abandoned by conventional tools.’