Global Crisis Leads I.M.F. Experts to Rethink Long-Held Ideas

The International Monetary Fund has always advocated to keep inflation low and allow money to flow freely across international boundaries. But some economists are now arguing that slightly higher inflation and restrictions on capital flows can sometimes help buffer countries from financial turmoil. The papers that the economists reported suggest that the International Monetary Fund should re-examine some of its long-established orthodoxies and that higher rates would have helped in the current crisis. Mr. Blachard and two other authors wrote this, "higher average inflation, and thus higher nominal interest rates to start with, would have made it possible to cut interest rates more, thereby probably reducing the drop in output and the deterioration of fiscal positions."