41 - Gauti Eggertsson on the Zero-Lower Bound and Liquidity Traps

Bill Nelson is the Chief Economist and an Executive Vice President at the Bank Policy Institute. Bill previously was a deputy director at the Division of Monetary Affairs at the Federal Reserve Board where his responsibilities included monetary policy analysis, discount window policy analysis, and financial institution supervision. He also worked closely with the BIS on the design of liquidity regulation. Bill joins David on Macro Musings to discuss the Fed's balance sheet, its reduction plans and how the Fed fell behind the curve. Specifically, David and Bill get into whether the Fed regretted its premature tightening period from 2015 to 2018, how the Fed’s focus on the baseline outlook left it not resilient to alternative developments, how concerns over another taper tantrum impacted the Fed’s decision-making, the Fed’s handling of its FAIT framework, and much more. Take the Macro Musings listener survey here.   Transcript for the episode can be found here.   Bill’s Bank Policy Institute profile: https://bpi.com/people/bill-nelson/ Bill’s American Banker archive: https://www.americanbanker.com/author/william-nelson-ab3618   Related Links: “Plane Crashes and Falling Behind the Curve” by Bill Nelson https://www.linkedin.com/pulse/plane-crashes-falling-behind-curve-bill-nelson/?trk=articles_directory “Guest post: A former Fed insider explains the internal debate over QE3” by Bill Nelson https://www.ft.com/content/254befb7-10f8-3f2c-a9a8-bc6226a6f1db "The Potential Ineffectiveness of Policy at the Zero Bound" (Memo to the Federal Reserve Board of Governors) by Bill Nelson and Brian Sack https://www.dropbox.com/s/fv21og7vpx1izml/BillNelsonMemo.pdf?dl=0  “Interpreting the Significance of the Lagged Interest Rate in Estimated Monetary Policy Rules” by William B. English, William R. Nelson, and Brian P. Sack https://papers.ssrn.com/sol3/papers.cfm?abstract_id=314425   David’s Twitter: @DavidBeckworth David’s blog: http://macromarketmusings.blogspot.com/

23 Mai 202259min

Josh Hendrickson is Associate Professor of Economics at the University of Mississippi and Chair of the Economics Department. Josh joins David on Macro Musings to discuss US monetary policy and US defense policy. Specifically, Josh and David discuss the coordination of fiscal and monetary policy and what Milton Friedman would think of it today, the Fed’s responsibility for modern inflation trends, state capacity and how it impacts economic growth, the role of national defense in the context of state capacity and economic growth, and much more.   Take the Macro Musings listener survey here.   Transcript for the episode can be found here.   Josh’s Twitter: @RebelEconProf Josh’s Ole Miss profile: https://economics.olemiss.edu/joshua-hendrickson/   Related Links:   *Central Banks are Inflation Creators, Not Inflation Fighters* by Joshua R. Hendrickson https://www.mercatus.org/publications/monetary-policy/central-banks-are-inflation-creators-not-inflation-fighters   *Evolution, Uncertainty, and the Asymptotic Efficiency of Policy* by Brian C. Albrecht, Joshua R. Hendrickson, and Alexander William Salter https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3251917   *The Coronavirus and Lessons for Preparedness* by Josh Hendrickson https://www.mercatus.org/publications/covid-19-crisis-response/coronavirus-and-lessons-preparedness   *Preventing Plunder, Military Technology, Capital Accumulation and Economic Growth* by Brian C. Albrecht, Joshua R. Hendrickson, and Alexander William Salter https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3025548   David’s blog: macromarketmusings.blogspot.com David’s Twitter: @DavidBeckworth

16 Mai 202251min

Peter Ireland is a professor of economics at Boston College, a research associate at the National Bureau of Economic Research, and a member of the Shadow Open Market Committee. Peter has also been a visiting scholar at numerous Federal Reserve Banks and is a returning guest to the podcast. He rejoins Macro Musings to talk about U.S. monetary policy during the pandemic and what the path forward looks like for the Fed and the policy landscape. David and Peter also discuss the current state of macroeconomics, including the most influential and popular business cycle theories, the present direction of policy macro, and whether or not the Fed’s current framework should shoulder blame for its pandemic policy missteps.     Take the Macro Musings listener survey here.   Transcript for the episode can be found here.   Peter’s Twitter: @PIrelandEcon Peter’s Boston College profile: https://www.bc.edu/bc-web/schools/mcas/departments/economics/people/faculty-directory/peter-ireland.html   Related Links:   *The Continuing Case for Nominal GDP Level Targeting* by Peter Ireland http://irelandp.com/papers/somc202204.pdf   *Targeting Nominal Income Under the Zero Lower Bound: The Case of the Bank of England* by Michael Belongia and Peter Ireland https://centerforfinancialstability.org/amfm/studies/ukngdp2021.pdf   *Strengthening the Second Pillar: A Greater Role for Money in the ECB’s Strategy* by Michael Belongia and Peter Ireland http://irelandp.com/papers/eurongdp.pdf   *Facts, Fears, and Functionality of NGDP Level Targeting: A Guide to a Popular Framework for Monetary Policy* by David Beckworth https://www.mercatus.org/system/files/beckworth-ngdp-targeting-mercatus-special-study-v2.pdf   *How to Ensure That Inflation Will Remain at the Federal Reserve’s 2 Percent Target* by Robert Hetzel https://www.mercatus.org/publications/monetary-policy/how-ensure-inflation-will-remain-federal-reserve%E2%80%99s-2-percent-target   David’s blog: macromarketmusings.blogspot.com David’s Twitter: @DavidBeckworth

9 Mai 202257min

Jens van 't Klooster is a political economist at the University of Amsterdam's Department of Political Science. Jens rejoins David on Macro Musings to discuss the changes taking place at the European Central Bank. Specifically, Jens and David talk about the ECB’s recent commitment to a gradual process of monetary tightening, the prospect and limitations of market neutrality in setting monetary policy, the rise of technocratic Keynesianism and questions surrounding the political legitimacy of the ECB’s recent policy decisions, as well as the politics surrounding the ECB’s approach to government debt.   Take our listener survey here.   Transcript for the episode can be found here.   Jens’s Twitter: @jvklooster Jens’s website: https://jensvantklooster.com/   Related Links:   *The Myth of Market Neutrality: A Comparative Study of the European Central Bank’s and the Swiss National Bank’s Corporate Security Purchases* by Jens van ’t Klooster and Clément Fontan https://www.tandfonline.com/doi/full/10.1080/13563467.2019.1657077   *Technocratic Keynesianism: A Paradigm Shift Without Legislative Change* by Jens van ’t Klooster https://www.tandfonline.com/doi/full/10.1080/13563467.2021.2013791   *The Politics of the ECB’s Market-Based Approach to Government Debt* by Jens van ’t Klooster https://academic.oup.com/ser/advance-article/doi/10.1093/ser/mwac014/6554757   David’s blog: macromarketmusings.blogspot.com David’s Twitter: @DavidBeckworth

2 Mai 20221h 1min

Colin Grabow is a policy analyst at the Cato Institute’s Center for Trade Policy Studies, and he joins Macro Musings to talk about US trade policies, the Jones Act, and the consequences of this harmful maritime statute. Specifically, David and Colin also discuss the counterfactual world of TPP, the future of international trade, and how to fix the myriad of problems caused by the Jones Act.   Transcript for the episode can be found here.   Colin’s Twitter: @cpgrabow Colin’s Cato Institute profile: https://www.cato.org/people/colin-grabow   Related Links:   Cato’s Project on Jones Act Reform: https://www.cato.org/project-jones-act-reform   *The Jones Act: A Burden America Can No Longer Bear* by Colin Grabow, Inu Manak, and Daniel Ikenson https://www.cato.org/publications/policy-analysis/jones-act-burden-america-can-no-longer-bear   *Rust Buckets: How the Jones Act Undermines U.S. Shipbuilding and National Security* by Colin Grabow https://www.cato.org/policy-analysis/rust-buckets-how-jones-act-undermines-us-shipbuilding-national-security   *The Progressive Case for Jones Act Reform* by Colin Grabow https://www.cato.org/study/progressive-case-jones-act-reform#:~:text=The%20Jones%20Act%20is%20unwise,repeal%2C%20of%20this%20odious%20law   *Candy-Coated Cartel: Time to Kill the U.S. Sugar Program* by Colin Grabow https://www.cato.org/policy-analysis/candy-coated-cartel-time-kill-us-sugar-program   *5 Years Later and the United States is Still Paying for Its TPP Blunder* by Colin Grabow https://www.cato.org/blog/5-years-later-united-states-still-paying-tpp-blunder   *The Cato Trade Team’s 2022 Policy Wish List* by Scott Lincicome, Inu Manak, Gabriella Beaumont-Smith & Colin Grabow https://www.cato.org/blog/cato-trade-teams-2022-policy-wish-list   *For Inflation Relief, the United States Should Look to Trade Liberalization* by Gary Clyde Hufbauer, Megan Hogan, & Yilin Wang https://www.piie.com/publications/policy-briefs/inflation-relief-united-states-should-look-trade-liberalization#:~:text=For%20inflation%20relief%2C%20the%20United%20States%20should%20look%20to%20trade%20liberalization,-Gary%20Clyde%20Hufbauer&text=With%20US%20inflation%20running%20at,calls%20anticompetitive%20behavior%20by%20corporations   *Biden’s Frozen Trade Policy* by Anne Krueger https://www.project-syndicate.org/commentary/trump-trade-policy-frozen-in-place-under-biden-by-anne-o-krueger-2022-02?barrier=accesspaylog   *Clashing over Commerce: A History of US Trade Policy* by Douglas Irwin https://press.uchicago.edu/ucp/books/book/chicago/C/bo24475328.html   David’s Twitter: @DavidBeckworth David’s blog: http://macromarketmusings.blogspot.com/

25 Apr 202253min

Nick Timiraos is a Chief Economics Correspondent for the Wall Street Journal and rejoins Macro Musings to discuss his new book titled, *Trillion Dollar Triage: How Jay Powell and the Fed Battled the President and a Pandemic and Prevented Economic Disaster.* Specifically, David and Nick discuss Jay Powell’s background and early career in law and finance, his unique path to being nominated as Fed Chair, how Powell’s character has aided him in his eventful tenure as Fed Chair, how he was uniquely suited to usher in the change to the Fed’s operating framework, and much more.   Check out the Conversations with Tyler episode featuring David Rubenstein.   Transcript for the episode can be found here.   Nick’s Twitter: @NickTimiraos Nick’s Wall Street Journal profile: https://www.wsj.com/news/author/nick-timiraos   Related Links:   Check out the Conversations with Tyler episode featuring David Rubenstein: https://conversationswithtyler.com/episodes/david-rubenstein/   *Trillion Dollar Triage: How Jay Powell and the Fed Battle the President and a Pandemic and Prevented Economic Disaster* by Nick Timiraos https://www.littlebrown.com/titles/nick-timiraos/trillion-dollar-triage/9780316272810/   David’s Twitter: @DavidBeckworth David’s blog: http://macromarketmusings.blogspot.com/

18 Apr 202253min

Joey Politano is an economist and a commentator who writes and publishes on a Substack newsletter named, “Apricitas Economics,” where he covers a wide range of subjects on a number of economic topics. Joey joins Macro Musings to talk about inflation, monetary policy, and the issues surround them. Specifically, David and Joey discuss the outlook for services and durable goods inflation, the indicators of tightening financial conditions, lessons learned from monetary policy over the past decade, and more.   Transcript for the episode can be found here.   Joey’s Twitter: @JosephPolitano Joey’s Substack: https://apricitas.substack.com/   Related Links:   *Inflation Hits 7.9%, and Things are Likely to Get Worse Before They Get Better* by Joseph Politano https://apricitas.substack.com/p/inflation-hits-79-and-things-are?s=r   *Financial Conditions are Tightening as the Fed Raises Rates* by Joseph Politano https://apricitas.substack.com/p/financial-conditions-are-tightening?s=r   *Understanding the Fed’s Hawkish Pivot* by Joseph Politano https://apricitas.substack.com/p/understanding-the-feds-hawkish-pivot?s=r   *Biden’s Deep State is on Substack* by Alex Thompson, Tina Sfondeles, and Max Tani https://www.politico.com/newsletters/west-wing-playbook/2022/01/10/bidens-deep-state-is-on-substack-495668   *Powell Says ‘Inflation is Much Too High’ and the Fed Will Take ‘Necessary Steps’ to Address* by Jeff Cox https://www.cnbc.com/2022/03/21/powell-says-inflation-is-much-too-high-and-the-fed-will-take-necessary-steps-to-address.html   David’s Twitter: @DavidBeckworth David’s blog: http://macromarketmusings.blogspot.com/

11 Apr 202244min

Eric Leeper is a professor of economics at the University of Virginia, an advisor to the Swedish and German central banks and a former Fed economist. Eric has written widely on the links between monetary policy and fiscal policy and joins David on Macro Musings to discuss these links and their implication for the price level. Specifically, Eric and David discuss the relationship between fiscal authorities and monetary authorities as it relates to fiscal dominance and monetary dominance, how the fiscal theory of the price level (FTPL) enhances our understanding of these relationships, how the FTLP can be applied to contemporary economies, what our expectations of fiscal policy should be moving forward, and much more.   Transcript for the episode can be found here.   Eric’s UVA profile: https://economics.virginia.edu/people/profile/eml3jf Eric’s NBER archive: https://www.nber.org/people/eric_leeper?page=1&perPage=50   Related Links:   *Some Unpleasant Monetarist Arithmetic* by Neil Wallace and Thomas J. Sargent https://www.minneapolisfed.org/research/quarterly-review/some-unpleasant-monetarist-arithmetic   *Equilibria under 'Active' and 'Passive' Monetary and Fiscal Policies* by Eric M. Leeper https://www.researchgate.net/publication/4907434_Equilibria_Under_'Active'_and_'Passive'_Monetary_Policies   *Monetary Science, Fiscal Alchemy* by Eric M. Leeper https://www.nber.org/papers/w16510   *The Fiscal Theory of Price Level with a Bubble* by Markus K. Brunnermeier, Sebastian A. Merkel, and Yuliy Sannikov https://www.nber.org/papers/w27116   *Liquidity Premiums on Government Debt and the Fiscal Theory of the Price Level* by Aleksander Berentsen and Christopher J. Waller https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2943241   David’s Twitter: @DavidBeckworth David’s blog: http://macromarketmusings.blogspot.com/

4 Apr 202251min