Recession Insurance

The IMF's Chief Economist, Olivier Blanchard, and several IMF economists have recent proposed that governments offer businesses and/or individuals “recession insurance.” This might work, since it would reduce uncertainty, which has placed a lot of spending decisions – by businesses (on higher output) and by consumers (on the items that businesses produce) – on hold.

NEW HAVEN – The Chief Economist of the International Monetary Fund, Olivier Blanchard, and several IMF economists have proposed in a recent paper that governments should offer what they call “recession insurance.” Companies and/or individuals would buy insurance policies, pay a regular premium for them, and receive a benefit if some measure of the economy, such as GDP growth, dropped below a specified level. Such insurance, they argue, would help firms and people deal with the “extreme uncertainty” of the current economic environment.