November 30, 2018

Regarding inflation and unemployment, monetary policy plays no role!

According to Robert Gordon writing in 2000 about the “fabulous decade”: Sometimes we are satisfied to find a single “smoking gun” or “silver bullet” that alone is powerful enough to provide an explanation of a macroeconomic puzzle. However, on this occasion we have no fewer than 12 separate and largely unrelated explanations of why inflation has been so low given unemployment, or why unemployment has been so low without igniting inflation. These 12 factors in the order discussed here are (1) falling real import prices through early 1999, (2) falling real oil prices through early 1999, (3) measurement improvements that… Read More

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“The Fed is doing an excellent job”

According to Jason Furman writing an op-ed for the WSJ: My @wsjopinion argues the Fed should pause in December—continuing the excellent job they have done. I do think being ahead of the curve on inflation is AN important consideration. If inflation rises too much it could be costly to reverse. Jay Powell thinks so too: …I am pleased to say that our economy is now close to both of those objectives. The unemployment rate is 3.7 percent, a 49-year low, and many other measures of labor market strength are at or near historic bests. Inflation is near our 2 percent… Read More

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