Jackson Hole Agenda

The agenda and papers can be found here.

You do not have to look hard to see what was going on at Jackson Hole. The Central Bankers were arguing for ongoing vigour in the regulatory effort, further easing in the North Atlantic Economies, and efforts to fix the fiscal side of their problem (via both monetary and fiscal adjustment).

Consider the following, mostly drawn from the abstracts of the papers.

1/ Bernanke — I covered it here.

2/ Forbes — gave support for ongoing regulation of banks:

Instead of limiting integration through trade and financial flows, countries should focus on reducing leverage in their domestic banking systems, strengthening macroeconomic fundamentals, balancing investment liabilities with international assets, and avoiding preferential treatment for debt financing

3/ Haldane — argued for simpler regulation

the type of complex regulation developed over recent decades might not just be costly and cumbersome but sub-optimal for crisis control. In financial regulation, less may be more

4/ Woodford — argued that central bankers are kidding themselves that they can stimulate the economy if they do not take risk

Central bankers confronting the problem of the interest-rate lower bound have tended to be especially attracted to proposals that offer the prospect of additional monetary stimulus while (i) not requiring the central bank to commit itself with regard to future policy decisions, and (ii) purporting to alter general financial conditions in a way that should affect all parts of the economy relatively uniformly, so that the central bank can avoid involving itself in decisions about the allocation of credit. Unfortunately, the belief that methods exist that can be effective while satisfying these two desiderata seems to depend to a great extent on wishful thinking

5/ Brunnermeier and Sannikov — framed monetary policy in terms of transfers, with the wonderfully accurate title Redistributive Monetary Policy.

They draw four conclusions:

A/ price stabiulity and financial stability are closely related;
B/ policy rules that ignore financial stability lack credibility over the cycle;
C/ fiscal policy matters – as unsustainable deficits eventually draw attention to Sargent and Wallace’s unpleasant arithamatic; and
D/ Credit risk can ‘block’ the monetary transmission mechanism.

6/ Lazear and Spletzer, wrote on the labor market, and found that:

there are no structural changes that can explain movements in unemployment rates over recent years. Neither industrial nor demographic shifts nor a mismatch of skills with job vacancies is behind the increased rates of unemployment. Although mismatch increased during the recession, it retreated at the same rate. The patterns observed are consistent with unemployment being caused by cyclic phenomena that are more pronounced during the current recession than in prior recessions

Seems like a roadmap to me …

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