As Mark Thoma notes, the Kansas City Fed has an inexplicable (and seemingly indefensible) policy of withholding from the public the research papers that are presented at Jackson Hole until after the conference is over.
Well, it’s over. For your skimming pleasure, below we provide links to the papers and excerpts from their abstracts and conclusions.
After the Fall, by Carmen and Vincent Reinhart:
While evidence of lost decades, as in the depression of the 1930s, 1980s Latin America and 1990s Japan are not ubiquitous, GDP growth and housing prices are significantly lower and unemployment higher in the ten-year window following the crisis when compared to the decade that preceded it. Inflation is lower after 1929 and in the post-financial crisis decade episodes but notoriously higher after the oil shock. We present evidence that the decade of relative prosperity prior to the fall was importantly fueled by an expansion in credit and rising leverage that spans about 10 years; it is followed by a lengthy period of retrenchment that most often only begins after the crisis and lasts almost as long as the credit surge.
Monetary Policy and Stock Market Booms, by Lawrence Christiano, Cosmin Ilut, Roberto Motto and Massimo Rostagno:
Data on the past 200 years of US stock market booms and simulations of a simple New Keynesian model suggest the following. An interest rate rule that assigns too much weight to expected ináation can induce welfare-reducing volatility in the stock market. Data and simulations suggest that amending an interest rate rule to allow an independent role for credit growth (beyond its role in constructing the ináation forecast) can help.
Modeling Inflation After the Crisis, by James Stock and Mark Watson:
We have suggested that the empirical regularity of Figure 2 – that U.S. recessions are associated with declines in inflation – can be captured by a simple model in which the deviation of core inflation from a long-run (statistical) trend is predicted by a new measure, the unemployment recession gap. The predictive value of this gap measure appears to be stable based on standard statistical tests, although we point this out with trepidation because the history of the inflation forecasting literature is one of apparently stable relationships falling apart upon publication.
Monetary Policy after the Fall, by Charles Bean, Matthias Paustian, Adrian Penalver, and Tim Taylor:
This paper draws some lessons from the crisis for the future conduct of monetary policy. (1) We argue that while relatively low policy rates compared to past experience contributed to the growth in credit and the rise in house prices in the run‐up to the crisis, they played only a modest direct role. But the reduction in volatility associated with the Great Moderation, some of which is likely to have been down to improved policy making, also appears to have had an effect. (2) Central banks have deployed a range of unorthodox policies during the crisis. Those that support particular markets, sectors or firms have no place in normal times. Asset purchases designed to lower longer‐term yields and boost asset prices more generally appear to have had some success but a short‐term interest rate policy instrument represents a preferable monetary instrument in normal times. (3) The case for raising target inflation rates is unpersuasive, while the gains from moving to price‐level targeting appear likely to be modest. (4) The case for “leaning against the wind” by raising policy rates higher than required to meet immediate inflation and output objectives appears strengthened by recent events, but the collateral damage to output from a policy that is sufficiently aggressive to make enough of a difference to credit conditions and asset prices is likely to be quite high. Development and deployment of a macro‐prudential policy toolkit focussed more directly on the underlying source of the exuberance looks a more promising way forward.
Monetary Science, Fiscal Alchemy, by Eric Leeper
In a surprising twist of fate, the practice of monetary policy marched along side the theory. Central banks around the world have adopted clearly understood objectives—such as inflation targeting and output stabilization—and central bankers espouse and articulate the science in public discussions about managing expectations, the transmission mechanism of monetary policy, and the role of uncertainty in policymaking. Modern monetary research and practical policymaking are united in aiming to make monetary policy scientific. …
No analogous transformation has occurred with macro fiscal policy. Although academic research has progressed, policy discussions reflect little of it. In the place of dynamics and expectations are Keynesian hydraulics and multipliers. Instead of clear objectives and rules, there are one-off “reforms” and Blue Ribbon Commissions….
Fiscal policy will shed its alchemy label when the question “What is the fiscal multi- plier?” is no longer asked and detailed analyses of “unsustainable fiscal policies” are no longer conducted without explicit analysis of expectations and dynamic adjustments.
Related links:
A question for the Kansas City Fed – Mark Thoma
2010 economic policy symposium – Kansas City Fed