There are actually two parts to examining the orthodox treatment of the output gap. The first is the review, looking backward to trace how we got to this state. The second is looking forward trying to figure what it means to be here. One final rearward assessment is required so as to frame how we view what comes next. As [...]
Janet Yellen was apparently “hawkish” again in her latest speech, though the reasons why she may have been continue to elude the media and many markets. In many ways, she doesn’t even know, a fact that she expressed several months ago to likewise very little appreciation. The FOMC may or may not raise rates in the next meeting or the [...]
One of the articles referenced in Janet Yellen’s Jackson Hole speech last week was a piece written for the Peterson Institute for International Economics by Senior Fellow Olivier Blanchard. Dr. Blanchard has, as noted earlier today, all the “right” credentials, which is why his conjecture gets included into the speeches of Federal Reserve Chairmen. Having taught at both Harvard and [...]
Last week, the CBO updated some of its calculations and methods for estimating the effects of “automatic stabilizers” on the deficit. These are Keynesian concepts whereby the government increases spending or redistribution (redundant) without discretion as the economy falls into the downside of a cycle. For the CBO’s purposes, the agency measures automatic stabilizers not on their effects, intended effects [...]
Taking a look back at economic projections from orthodox models (and the theories they incorporate and encompass) is more than just a review of past econometric failures. That is the most obvious component as the ability of mainstream models to forecast actual economic conditions is inarguably flawed beyond repair. That calls into question, certainly, current outlooks based upon the same [...]
As I have said before, the handoff from Bernanke to Yellen was significant not just in terms of background but also in philosophy and viewpoint. Both were strictly academic statisticians (they call themselves economists) but there was an immense shift about QE. To be fair, there is some evidence that thoughts about QE had changed during the last year of [...]
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