The Transformational Role of the Great Recession for Economic Governance

Please cite the paper as:
Constantine E. Passaris, (2018), The Transformational Role of the Great Recession for Economic Governance, World Economics Association (WEA) Conferences, No. 2 2018, The 2008 Economic Crisis Ten Years On, 15th October to 30th November, 2018

This paper has been included in the publication
“The 2008 Crisis Ten Years On: in Retrospect, Context and Prospect Paperback”


The financial crisis of 2008 and its aftermath in the form of the Great Recession have precipitated the need for redesigning economic governance. The severity of the economic governance fault lines that were created by the Great Recession are comparable to those of the Great Depression of the 1930s. Both events underlined the ineffectiveness of the scope and substance of economic policy to address the contemporary economic challenges.

The operational definition of economic governance that will be used in this paper encompasses the institutional economic governance architecture, the machinery of economic governance and the scope and substance of economic policy.

This paper provides an anatomy of the financial crisis of 2008 and describes the fault lines in economic governance that appeared subsequent to the Great Recession. It concludes with a modern template for economic governance that is congruent with the new global economy of the 21st century.

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  • Arturo Hermann says:

    I found your paper very interesting, in particular for advocating a new comprehensive and interdisciplinary governance.
    As a matter of fact, one of the worrisome aspect of the post-2008 crisis is that very little has changed in economic theory and in the working of economic systems. With regard to the latter aspect, the trend of financial speculation is as strong as before, whereas the objectives of innovating and rendering sustainable real economies remain far in the background.
    A central aspect for curbing this overwhelming financial course refers to monetary policy, and the governance of banking and financial institutions.
    A policy action aimed at keeping at a permanent low level real interest rate would increase the Keynesian marginal efficiency of capital and then the incentive for productive investments. Moreover, a low real interest rate would help reduce the burden of interest payments on public and private debt. This reduction in interest payments, in turn, would help decrease a relevant source of economic inequalities, which has played a central role in depressing effective demand.
    This measure could be accompanied by policies, (i) aimed at discouraging speculative bubbles backed by fictitious assets and (ii) fostering initiatives aimed at rendering sustainable and innovative our real economies.