Stanley Fischer was an economist and central banker who died on May 31st 2025, aged 81. He served as the IMF's first deputy managing director from 1994 to 2001, as governor of the Bank of Israel and as vice-chairman of America's Federal Reserve from 2014 to 2017.
Fischer grew up in Mazabuka, a small town in what is now Zambia, where his father, a Jewish immigrant from Latvia, ran the general store. He won a scholarship to the London School of Economics. He earned his PhD at the Massachusetts Institute of Technology, where he later returned as a faculty member after a few years at the University of Chicago.
Although charmed by Keynes's "General Theory", Fischer saw the assault on Keynesian economics from Chicago and elsewhere as an opportunity. He adopted the critics' internally consistent, forward-looking models, added realism, and reached different conclusions. In a breakthrough 1977 paper he showed that monetary policymakers are not powerless to steer output if wages are somewhat "sticky" or inflexible—refuting the claim that policy is futile when everyone knows what policymakers are up to.
Fischer co-wrote two textbooks and taught a legendary class at MIT. He became what economists might call a "transmission mechanism" for the MIT economics tradition, advising the theses of some of the world's most influential economists, including Mario Draghi (former head of the European Central Bank) and Ben Bernanke (former chair of the Federal Reserve). Olivier Blanchard was another protégé and co-author. Some thesis advising took place while jogging along the Charles river; when Fischer wanted a student to slow down their presentation, he would speed up his jogging.
Fischer's first foray into policymaking was in the 1980s, providing advice on quashing triple-digit inflation in Israel. Israel cut its budget deficit, pegged its currency temporarily and raised interest rates, combined with a less orthodox wage freeze. The plan worked. Fischer's main regret was the neglect of structural reforms, such as privatising government firms, which proved difficult to implement after the rescue succeeded.
As IMF number two, Fischer dealt with crises in Mexico, Thailand, Indonesia, South Korea, Brazil, Argentina and Russia. He had a dovish reputation within the fund, giving his blessing to fiscal easing in Thailand and South Korea when it became clear austerity was counterproductive. He understood that investors' expectations could be self-fulfilling: the fund often found itself trying to persuade investors to believe in rescues that could have worked if investors had only believed they would. He was less worried than many of the fund's critics about moral hazard. In his view, if you have to cripple a country to send a message, the message is being sent too late.
He compiled a list of lessons from his crises, including the value of what he called the "eternal verities" preached by the IMF: keeping inflation and public debt in check and following growth-friendly policies. He once said: "Whatever type of exchange-rate arrangement a country has, there will be times when it wished it had a different one."
In 1995 he visited his father's hometown in Latvia, where he saw the damage wreaked by communism—an experiment that lasted two generations and set the country back a generation, by his calculations. A trip back to Zambia in 2000 was more encouraging; he was welcomed by the new owner of his father's shop.
The strong give up and move away, while the weak give up and stay.