The financial crisis that started in 2007 brought the global economy to the brink and in many respects it is still unfolding especially in Europe. How to understand and deal with the crisis has naturally been the subject of fierce debates that continue today. However some consensus appears to be emerging with regard to the shocks that originated the crisis the mechanisms that amplified those shocks and official policy responses especially from central banks. All of these aspects of the new consensus assign a substantially bigger role to financial imperfections and institutions than previously assumed to the point that one can safely say that for the next several years research on macroeconomic policy will be dominated by the interaction between financial frictions the financial system and aggregate fluctuations.