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April 17, 2015

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Paul Krugman: That Old-Time Economics

Posted: 17 Apr 2015 04:50 AM PDT

Not all macroeconomic models failed during the Great Recession. "Old-time macroeconomics" ... "provided excellent guidance":

That Old-Time Economics, by Paul Krugman, Commentary, NY Times: America has yet to achieve a full recovery from the ... financial crisis. Still, it seems fair to say that we've made up much, though by no means all, of the lost ground.
But you can't say the same about the eurozone... Why has Europe done so badly? In the past few weeks, I've seen a number of speeches and articles suggesting that the problem lies in the inadequacy of our economic models — that ... macroeconomic theory ... failed to offer useful policy guidance... But is this really the story?
No, it isn't..., basic textbook models ... have performed very well. The trouble is that policy makers in Europe decided to reject those basic models in favor of alternative approaches that were innovative, exciting and completely wrong. ...
In America, the White House and the Federal Reserve mainly stayed faithful to standard Keynesian economics. ... Meanwhile, the Fed ignored ominous warnings that it was "debasing the dollar"...
In Europe, by contrast, policy makers were ready and eager to throw textbook economics out the window in favor of new approaches. The European Commission ... eagerly seized upon supposed evidence for "expansionary austerity... Meanwhile, the European Central Bank took inflation warnings to heart and raised interest rates in 2011 even though unemployment was still very high. ...
European policy makers ... sought justifications for the harsh policies they were determined, for political and ideological reasons, to impose on debtor nations; they lionized economists, like Harvard's Alberto Alesina, Carmen Reinhart, and Kenneth Rogoff, who seemed to offer that justification. As it turned out, however, all that exciting new research was deeply flawed, one way or another.
And while new ideas were crashing and burning, that old-time economics was going from strength to strength. ...
The point is that it's wrong to claim ... that policy failed because economic theory didn't provide the guidance policy makers needed. In reality, theory provided excellent guidance, if only policy makers had been willing to listen. Unfortunately, they weren't. And they still aren't. ...
But back to the question of new ideas and their role in policy. It's hard to argue against new ideas in general. In recent years, however, innovative economic ideas, far from helping to provide a solution, have been part of the problem. We would have been far better off if we had stuck to that old-time macroeconomics, which is looking better than ever.

Have Blog, Will Travel

Posted: 17 Apr 2015 04:13 AM PDT

I am here today (as is Tyler Cowen, he explains the rules we have to follow):

NATIONAL BUREAU OF ECONOMIC RESEARCH, INC.
30th Annual Conference on Macroeconomics
Martin Eichenbaum and Jonathan Parker, Organizers
April 17 and 18, 2015
The Royal Sonesta Hotel
Cambridge, MA

PROGRAM

Friday, April 17:

8:30 am - Continental Breakfast

9:00 am - Nicola Gennaioli, Università Bocconi, Yueran Ma, Harvard University, Andrei Shleifer, Harvard University and NBER, Expectations and Investment

Discussants:  Chris Sims, Princeton University and NBER, Monika Piazzesi, Stanford University and NBER

10:30 am - Break

11:00 am - Tao Zha, Emory University and NBER, Chun Chang, SAIF Shanghai Jiao, Tong University, Kaiji Chen, Emory University, Daniel F. Waggoner, Federal Reserve Bank of Atlanta, Trends and Cycles in China's Macroeconomy

Discussants:  Mark Watson, Princeton University and NBER, John Fernald, Federal Reserve Bank of San Francisco

12:30 pm Lunch – Skyline Rooms

2:00 pm - Hanming Fang, University of Pennsylvania and NBER, Quanlin Gu, Peking University, Wei Xiong, Princeton University and NBER, Li-An Zhou, Peking University, Demystifying the Chinese Housing Boom

Discussants: -  Martin Schneider, Stanford University and NBER, Erik Hurst, University of Chicago and NBER

3:30 pm  Break

4:00 pm - Daron Acemoglu, Massachusetts Institute of Technology and NBER, Ufuk Akcigit, University of Pennsylvania and NBER, William Kerr, Harvard University and NBER, Network and the Macroeconomy:  An Empirical Exploration

Discussants: - Xavier Gabaix New York University and NBER, Lawrence Christiano, Northwestern University and NBER

5:30 pm - Adjourn and Group Dinner - Skyline Rooms, Dinner speaker:  Ben Bernanke, Brookings Institution

Saturday, April 18:

8:30 am - Continental Breakfast

9:00 am - Regis Barnichon, CREI, Andrew Figura, Federal Reserve Board, Declining Desire to Work and Downward Trends in Unemployment and Participation

Discussants:  Richard Rogerson, Princeton University and NBER, Robert Hall, Stanford University and NBER

10:30 am - Break

11:00 am - Cristina Arellano, Federal Reserve Bank of Minneapolis and NBER, Andrew Atkeson, University of California at Los Angeles and NBER, Mark L. J. Wright, Federal Reserve Bank of Chicago and NBER, External and Public Debt Crises

Discussants - Ricardio Reis, Columbia University and NBER, Harald Uhlig, University of Chicago and NBER

12:30 pm - Adjourn

Links for 04-17-15

Posted: 17 Apr 2015 12:06 AM PDT

Video: Rethinking Macro Policy

Posted: 16 Apr 2015 09:11 AM PDT

Rethinking Macro Policy III: Session 3. Monetary Policy in the Future
Chair: José Viñals, Ben Bernanke, Gill Marcus, John Taylor


Rethinking Macro Policy: Session 4. Fiscal Policy in the Future
Chair: Vitor Gaspar, Marco Buti, Martin Feldstein, Brad DeLong,

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