Search Results
Journal Article
Understanding Post-Pandemic Surprises in Inflation and the Labor Market
Since the COVID-19 pandemic, the United States has experienced sharply rising then falling inflation alongside persistent labor market imbalances. This Economic Commentary interprets these macroeconomic dynamics, as represented by the Beveridge and Phillips curves, through the lens of a macroeconomic model. It uses the structure of the model to rationalize the debate about whether the US economy can expect a hard or soft landing. The model is surprised by the resiliency of the labor market as the US economy experienced disinflation. We suggest that the model’s limited ability to capture ...
Report
What Can Time-Series Regressions Tell Us About Policy Counterfactuals?
We show that, in a general family of linearized structural macroeconomic models, knowledge of the empirically estimable causal effects of contemporaneous and news shocks to the prevailing policy rule is sufficient to construct counterfactuals under alternative policy rules. If the researcher is willing to postulate a loss function, our results furthermore allow her to recover an optimal policy rule for that loss. Under our assumptions, the derived counterfactuals and optimal policies are robust to the Lucas critique. We then discuss strategies for applying these insights when only a limited ...
Briefing
Why Are Economists Still Uncertain About the Effects of Monetary Policy?
Despite decades of research, there remains substantial uncertainty about the quantitative effects of monetary policy. Different models produce conflicting predictions, and these predictions lack precision. This article discusses some reasons for these issues. In addition to the relative lack of data, the structure of the economy has continued to evolve, posing challenges for empirical macroeconomic analysis more generally. Economists have been confronting these challenges by developing tools to jointly consider a range of models and continuing to seek new sources of data.