tag:blogger.com,1999:blog-2499715909956774229.post3767126012092960316..comments2024-03-09T02:22:57.289-08:00Comments on Stephen Williamson: New Monetarist Economics: Commitment, the State of the World, and DissentStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-2499715909956774229.post-11631805563554100742011-08-17T06:59:38.709-07:002011-08-17T06:59:38.709-07:00"To say that QE worked, but economic conditio..."To say that QE worked, but economic conditions haven't improved a lot, is not necessarily contradictory, right?"<br /><br />Right. But to evaluate whether QE worked, we need a structural model, otherwise we can't evaluate the effectiveness of the policy. Hamilton and other researchers who have attempted to determine the effects of QE are serious economists, but the problem is a difficult one. I have yet to see a theory that meets "industry standards" and also tells us that QE works the way Bernanke claims it does.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-38545107899909638732011-08-16T20:59:22.576-07:002011-08-16T20:59:22.576-07:00Wouldn't you agree that growth prospects are m...Wouldn't you agree that growth prospects are much lower now than they were at the beginning of this year? Many were predicting 4% growth this year (after all the slump we had in the recent past), but now forecasts seem to be about half that. Unemployment as well is only very marginally better than it was at the beginning of the year. <br /><br />As Hamilton and many others have shown in their research, QE did have an impact on long term rates, but that impact was not big. And, besides that, other things happened in between. Growth prospects in Europe are lower (even Germany is now trending down), the high energy prices etc. To say that QE worked, but economic conditions haven't improved a lot, is not necessarily contradictory, right?<br /><br />-RSAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-43712367050212632942011-08-16T12:02:48.658-07:002011-08-16T12:02:48.658-07:00Yes, you could say this is a response to financial...Yes, you could say this is a response to financial instability. You have to do something, so let's try this. On the other hand, you could interpret it as responding to panic with panic.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-58774019553547050492011-08-16T09:53:49.262-07:002011-08-16T09:53:49.262-07:00Seems to me that there is some experimentation goi...Seems to me that there is some experimentation going on. Bernanke et al's conviction could easily be that 1) QE2 worked but 2) It didn't work as well as they hoped so 3) If you double down you could get there.<br /><br />Where things gets muddied is with communication and politics. For political purposes they may want to de-emphasize 2) and emphasize 3). This is relatively easy as a communication strategy because the data has been so bad and they don't need to go out there and say that they are doing a lot of experimentation.<br /><br />-RVAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-73463507870323723482011-08-16T09:34:08.487-07:002011-08-16T09:34:08.487-07:00Stephen, I agree with your post. I think the FOMC ...Stephen, I agree with your post. I think the FOMC said: we had some bad data revisions and a couple of bad days on the stock market, so let's put aside the inflation and unemployment numbers, let's put aside Taylor rules, let's put aside what we did in the past and how we explained our previous actions, and let's show the public that we care by doing something. Keeping rates at zero till 2013 is something, so let's do that.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-20403268784691975442011-08-16T07:06:47.105-07:002011-08-16T07:06:47.105-07:00That could be, but I think they are sticking to th...That could be, but I think they are sticking to their guns, for the most part. There may have been a few public doubts expressed about QE2 by Fed officials - Plosser, for example, I think, but you would have to look through his speeches. However, the overwhelming message coming from the Fed system is that QE2 worked, with empirical evidence to back it up. Bullard's slides that I linked to above were from a St. Louis Fed conference. The thrust of the empirical work at that conference - from Jim Hamilton and others - was that QE2 worked. The problem is that the theory is either weak or non-existent, and there is therefore no structural empirical work on the matter.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-24352924328129653522011-08-16T04:56:21.814-07:002011-08-16T04:56:21.814-07:00Isn't the truth that QE2 didn't work as we...Isn't the truth that QE2 didn't work as well as they hoped so they want more easing, but that if they say QE2 didn't work then people will oppose more of the same? This would explain why the public statements and the actions don't quite match up.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-17729143749500863242011-08-15T17:29:06.905-07:002011-08-15T17:29:06.905-07:00If I understand you (I'm just looking at the l...If I understand you (I'm just looking at the last bit you wrote), I agree that it's not appropriate to be discussing the Taylor rule at the lower bound. Some people in the Fed system do that, unfortunately. To Bernanke's credit, he seems to recognize that it's going to be difficult to communicate what the FOMC is up to in the current context, and takes pains to get the message across that QE2 and such are just business as usual. There's a sense in which it is in fact business as usual, but I don't think in the way he is communicating it.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-21658015496083952652011-08-15T15:08:53.019-07:002011-08-15T15:08:53.019-07:00Steve,
if the public really believes that in a bet...Steve,<br />if the public really believes that in a better state<br />than last meeting the fed raises rates and in <br />a worse state it lowers than they might as well<br />believe that in a desperate state the fed announces<br />something more aggressive, discounts bernanke appropriately<br />and assumes that in 2012:2 if the unemployment rate<br />went down and inflation up we return to the old game discarding announcements in the desperate state<br />asked differently what model do you have in mind <br />that describes the believes on what the public opinion has <br />in mind on the behavior of the fed at the lower bound<br />to my knowdledge the taylor rule cant be it without adjustmentAnonymousnoreply@blogger.com