“The global financial crisis challenged the existing monetary policy paradigm. Before the crisis, dangerous financial imbalances grew under stable output gaps and low inflation. After the bust, a massive stimulus mitigated the downturn, but could not prevent the deepest recession since the Great Depression, as policy rates rapidly hit the zero lower bound (ZLB), and large swings in capital flows complicated macroeconomic management in small open economies. This has led to an intense discussion about what shape monetary policy should take once economic conditions have settled down into the post-crisis “new normal.” This paper reviews the current state of the debate to extract common policy conclusions where possible, and lays out theunresolved issues where extracting such conclusions is not possible. In doing so, the paper raises more questions than it provides answers: Should there be new objectives for monetary policy? Long-term price stability must remain a primary objective of monetary policy. But the crisis showed that it is not a sufficient condition for macro stability.  Going forward, additional intermediate objectives (such as financial and external stability) may play a greater role than in the past. When possible, these should be targeted with new or rethought instruments (macroprudential tools, capital flow management, foreign exchange intervention). But should these prove insufficient, interest-rate policy might have to play a role.”  [Research, Monetary and Capital Markets, and Strategy and Policy Review Departments, Monetary Policy in the New Normal Prepared by Tamim Bayoumi, Giovanni Dell’Ariccia, Karl Habermeier, Tommaso Mancini-Griffoli, Fabián Valencia, and an IMF Staff Team, April 2014]