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From the Great Moderation to the New Policy Regime (1990–2025)

Research Paper 1 of The New Global Macroeconomic Regime: The Transformation of Fiscal Policy, Monetary Policy and Global Trade

Luca Bindi·23 July 2026·42 min read

Between roughly 1990 and the mid-2010s, the global economy operated under a coherent, mutually reinforcing macroeconomic policy framework -- fiscal discipline, independent inflation-targeting central banks, deep trade globalisation, and open capital markets -- known in its stability dimension as the Great Moderation. This paper argues that the world is not experiencing a sequence of unrelated shocks (the Global Financial Crisis, the eurozone debt crisis, COVID-19, the 2021-2023 inflation surge, the return of great-power competition) but a structural transition from one internally consistent policy regime to another, driven by the accumulation of vulnerabilities beneath decades of apparent stability, the exhaustion of globalisation-driven disinflationary tailwinds, and a shift toward security-maximising statecraft. It traces this evolution chronologically and sets out four long-term scenarios for how the transition may resolve, laying the foundation for the nine research papers that follow in this series.

Key Takeaways

The 1990-2025 policy regime rested on four mutually reinforcing pillars: fiscal consolidation, independent inflation-targeting central banks, deep trade globalisation, and open capital markets.
The Global Financial Crisis, the eurozone debt crisis, COVID-19, and the 2021-2023 inflation surge are best read as a single structural regime transition, not a sequence of unrelated shocks.
Six durable structural forces -- defence spending, energy transition, industrial policy, demographics, supply-chain resilience, and protectionism -- are driving the shift, and none of them is likely to reverse once any single cyclical shock fades.
The emerging regime features a larger, more active fiscal state, monetary policy operating at structurally higher neutral rates, strategic trade and industrial policy, and a more multipolar international economic order.
Four long-term scenarios are proposed for the coming decade: a managed transition, a productivity-driven soft landing, an accelerating-fragmentation path, and a fiscal-dominance path -- developed further across the remaining nine papers in this series.

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Sources

BIS, IMF, OECD, ECB, Federal Reserve, World Bank, WTO, and peer-reviewed academic literature on macroeconomic policy regimes — BIS / IMF / OECD / ECB / Federal Reserve / World Bank / WTO

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