tag:blogger.com,1999:blog-17232051.post5719975126973051972..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Are jobless recoveries the Fed's fault?Noah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-17232051.post-20004576814620366302013-02-01T10:54:52.342-05:002013-02-01T10:54:52.342-05:00But Bernanke was worried about deflation in 2002. ...But Bernanke was worried about deflation in 2002. The Reagan recovery had 4 percent inflation whereas all three subsequent recoveries had lower inflation and slower growth. Maybe this disinflation wasn't intentional or "opportunistic," but it happened.Peterhttps://www.blogger.com/profile/08272747870634233567noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-51813357257778120202013-02-01T10:48:12.255-05:002013-02-01T10:48:12.255-05:00In the late 90s I believe Greenspan allowed unempl...In the late 90s I believe Greenspan allowed unemployment to fall to 4 percent (without runaway inflation) not out of generousity of his Randian heart, but because the Fed was fighting international financial crises and panics.<br /><br />But to the main point, as O'Brien points out it's like the Fed switched from a long-term NGDP level trend of 5 percent to a target of 4 percent NGDP growth. <br />Peterhttps://www.blogger.com/profile/08272747870634233567noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-88753593958811367002013-02-01T10:37:30.838-05:002013-02-01T10:37:30.838-05:00I thought that Econbrowser post was spot on. Speci...I thought that Econbrowser post was spot on. Specifically:<br /><br />"Why have the last three recoveries been viewed as jobless, while previous recoveries were not? This is because the speed of recoveries has been slower than before. In the early 1990s and early 2000s, as well as after the Great Recession, slow growth meant that sizable output gaps persisted well into the recovery. In contrast, in most earlier recessions, the output trough was followed by a period of above-normal growth that pulled output back to its previous trend. As Okun’s Law predicts, unemployment also returned to normal, making the recoveries look job-full."<br /><br />Early on, at a Congressional Hearing a deferential Congresscritter tossed Bernanke a softball about Rogoff and Carmen's "This Time It's Different" and how recoveries are historically slow after financial crisis. Bernanke deadpanned that yes they're usually slow because of policy mistakes.<br /><br />This time the Fed hasn't received much help from fiscal policy, with government spending at austerity levels compared to past recoveries.Peterhttps://www.blogger.com/profile/08272747870634233567noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-45420041954319181812013-01-31T23:06:07.899-05:002013-01-31T23:06:07.899-05:00"Some international comparisons find that rec..."Some international comparisons find that recoveries tend to be anemic after a certain kind of financial crisis. If I were a betting man, I'd put my money on that explanation."<br /><br />I was curious about the early 90s sluggishness as well, and had completely forgotten about the S&L crisis...<br /><br />http://en.wikipedia.org/wiki/Resolution_Trust_Corporation<br /><br />Getting our financial system cleaned up should be priority one...Doc at the Radar Stationnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-20289701558890182013-01-31T20:34:47.191-05:002013-01-31T20:34:47.191-05:00our three jobless recoveries coincide with our neg...our three jobless recoveries coincide with our negative current account balances, since 1985/90<br /><br />http://research.stlouisfed.org/fred2/series/BOPBCAA?cid=125Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-84610278785115853402013-01-31T19:54:32.927-05:002013-01-31T19:54:32.927-05:00It's quite possible that the Fed memos and spe...It's quite possible that the Fed memos and speeches suggesting "opportunistic disinflation" were actually a reaction to, rather than evidence of a policy-related cause of, the jobless recoveries. Remember that HW Bush campaigned in 1992 using the argument that the 1990 recession was necessary to prevent inflation. It seems likely to me that Fed officials would have made similar arguments to shield themselves from criticism, when the reality is that they simply didn't have any more ideas on how to spur job creation, with or without inflation. Their statements should not be taken at face value.<br /><br />"it is fashionable these days to say that looking at the Fed's policy rate actually tells us nothing whatsoever about monetary policy" <br />I think this point is under-appreciated. There are, in essence, two possible ways to lower nominal interest rates: one is by contracting the money supply to lower inflation rates, which is contractionary, and the other is to expand the money supply to provide liquidity, which is expansionary. And the Fed doesn't necessarily control which of these will happen when it chooses an interest rate target (strictly speaking it depends on time frame--what lowers nominal interest rates in the short run should raise them in the long run, and vice versa). While there is also money velocity to consider, which is slightly positively correlated with interest rates, I think that looking at monetary aggregates is fairly informative: http://research.stlouisfed.org/fredgraph.png?g=f7C<br /><br />After the 1990 recession, the money supply actually contracted, suggesting that the stance of monetary policy was relatively tight. Not so for 2001, which is consistent with the fact that inflation fell after 1990 and rose after 2001.<br /><br />In otherwords, there may have been opportunistic disinflation in 1990, but not so much in the other jobless recoveries.Matthew Martinhttps://www.blogger.com/profile/10254244795963585737noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-8295807052905096842013-01-31T19:48:36.842-05:002013-01-31T19:48:36.842-05:00The job market paper of Grace Weishi Gu, from Corn...The job market paper of Grace Weishi Gu, from Cornell (link from Cowen) suggests that the jobless recoveries are due to the increased fixed cost of providing employee benefits (which also vary cyclically). I think this makes a lot of intuitive sense, and she's obviously got some data to back it up.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-61268278182754518382013-01-31T16:43:41.407-05:002013-01-31T16:43:41.407-05:00One thing the "opportunistic disinflation&quo...One thing the "opportunistic disinflation" story has going for it is that the Fed seems to have lowered its ceiling on what it considers to be an acceptable inflation rate. It was higher during the famously hawkish Volcker Fed.Wonks Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-53230009647991212112013-01-31T14:45:20.862-05:002013-01-31T14:45:20.862-05:00Set aside the fact that we have had a ""...Set aside the fact that we have had a ""little shock" in the aggregate global supply function in the form of a double amount of labor supply. That must have had some effect on prices and on taming inflation all over the world, specially in the former inflationist countries.<br />What a convoluted and ad hoc theory for explaining a fact which can be explained in a very straight and clear manner, like the long term reduction in the thecnological rate of growth combined with the fact that recent booms were not caused at all by positive supply side shocks but by hot finantial and "artificial" debt-driven boosts.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-1713121700811488142013-01-31T13:54:07.805-05:002013-01-31T13:54:07.805-05:00the Fed *was* pursuing opportunistic disinflation....the Fed *was* pursuing opportunistic disinflation... but whether that causes jobless recoveries or not i doubt (maybe that's what you are saying but its not clear). But mainly that's because I doubt the whole jobless recovery thing in the first place. <br /><br />http://www.econbrowser.com/archives/2013/01/guest_contribut_31.html<br /><br />an ngdp growth targeting fed reaction function will look just like a taylor rule with equal weights on inflation on output - under the right conditions. So its hard to guess what the fed was doing until they actually told us that they favored a taylor rule with equal weights on the employment and inflation mandate. <br /><br />dwbnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-5970326198475337242013-01-31T13:53:45.468-05:002013-01-31T13:53:45.468-05:00And here are two serious attempts to explain joble...And here are two serious attempts to explain jobless recoveries. <br /><br />-The credit view (Calvo, Coricelli, Ottonello):<br />http://www.columbia.edu/~gc2286/documents/JoblessandWagelessRecoveries-July252012.pdf<br /><br />-The structural view (Jaimovich, Siu):<br />http://www.nber.org/papers/w18334.pdfCAnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-19763209328659744522013-01-31T13:37:39.315-05:002013-01-31T13:37:39.315-05:00Thanks, fixed.Thanks, fixed.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-19300314420035104772013-01-31T12:52:33.654-05:002013-01-31T12:52:33.654-05:00Noah, have you read this?
http://www.imf.org/exter...Noah, have you read this?<br />http://www.imf.org/external/pubs/ft/wp/2013/wp1310.pdf<br />It seems that ther is no jobless but growth less recoverieswww.MiguelNavascues.comhttps://www.blogger.com/profile/00880006105532291958noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-79595623975940172802013-01-31T12:40:53.897-05:002013-01-31T12:40:53.897-05:00The rate hikes started in 1994, not 1995.The rate hikes started in 1994, not 1995.Danyznhttps://www.blogger.com/profile/06951151581963125957noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-48920294958877188182013-01-31T12:11:21.309-05:002013-01-31T12:11:21.309-05:00I've always been Koo-ian.I've always been Koo-ian.Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-27869807040815585242013-01-31T12:07:00.098-05:002013-01-31T12:07:00.098-05:00Getting Koo-ian lately? Although the post on Japan...Getting Koo-ian lately? Although the post on Japan was conflicting in inspiration. :-)Dimitarhttp://lazyfairyecon.tumblr.com/noreply@blogger.com