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On the P curve discussion. To try to clarify semantics, and what I think the discussion is about.
I take ``belief in the Phillips curve’’ to mean ``belief that there is a positive relation, however complex and shifting, between inflation and activity.”
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The heated discussion between Larry Summers and Emmanuel Saez at the PIIE conference ( bit.ly/2BtKqWK) is exciting. But the discussion by Gabriel Zucman (currently only audio at bit.ly/2Iv4sno session 11, at 23:58, video available monday) is more informative. twitter.com/gabriel_zucman…
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Japan has a virulent case of ``secular stagnation’’, i.e. weak private domestic demand. To maintain full employment, it has needed and still needs aggressive monetary and fiscal policies. Monetary policy is doing everything it can. The burden thus falls on fiscal policy.
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Janos Kornai died yesterday. He was one of my heroes, not just because of his research, but because the way he lived his life. Here is an interview of him I did in 1998. kornai-janos.hu/Blanchard1999%…
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When the virus struck, the priority was to protect fragile firms and workers. As the lockdown ends, the focus must change from protection to reallocation. How it should done is the topic of a piece by Jean Pisani Ferry, Thomas Philippon and me. bit.ly/3dIiHCY
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On immigration in Europe. The only realistic option, economically and politically: Let countries set their own targets, but fully mutualise the costs across EU members. (As an added bonus: a good and sellable reason to have a common EU budget.) bit.ly/2MJFbFF
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2.Les dépenses budgétaires augmentent la demande, mais l’offre ne peut répondre que si l’économie n’est pas au plein emploi. Sinon elles créent de l’inflation.
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2. Given China's zero-covid policy, this implies frequent and major lockdowns, with a large effect on activity in China.
It also implies major effects on trade. Sharp limits on travel, inbound and outbound will make it hard to maintain/expand supply chains going through China.
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Concerns about the Biden stimulus plan bit.ly/3qsCMGL were justified. Inflation is running much above what was forecast. We should now concentrate on what comes next, what the Fed may need to do, and what the implications may be. A few thoughts: bit.ly/3n8s7yO
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Too slow progress on euro inflation should be seen as great news, not bad news: It tells us that unemployment can decline for quite a bit more without triggering overheating. The natural unemployment rate is lower than policy makers assumed.
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7/8. It is a highly inefficient way to deal with distributional conflicts. One can/should dream of a negotiation between workers, firms, and the state, in which the outcome is achieved without triggering inflation and requiring a painful slowdown.
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My views on the Phillips curve puzzles and non puzzles. And the implication for wage inflation targeting. (from a discussion at Brookings)
bit.ly/319lCO1
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For those who still think that trade wars have a winner and a loser: Look at the synchronous movements of stock markets in Asia and in the US on Friday, and on Monday. Case closed.
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An interesting, sociological, issue. How fast will the emerging academic consensus on fiscal policy filter through to policy makers? twitter.com/pisaniferry/st…
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A wide ranging discussion about public debt between Ken Rogoff and me, moderated by Gita Gopinath. More convergence than divergence. I learned a lot from it. (the video lasts about an hour. Starts at minute 4.50 ) twitter.com/IMFLive/status…
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Euro crisis on hold.
Next:
Capital outflows and sudden stops in emerging market countries.
Plumbing failures in the financial system.
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In response to popular demand. An AEA discussion board, to be populated with information about job market, discussions about anything economic. True facts, no rumors, and civility. Whether it works depends on all of us.
aeaweb.org/economics-disc…
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Rethinking monetary policy, with Ben Bernanke, Mario Draghi, Phillip Hildebrand, Lael Brainard, Alan Possen. bit.ly/2kM3UQH
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Democrats. Delighted by your win. But please don't go for the 2000 dollars checks. Aim the money better, for those who really need it.
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1/8 This is a great discussion, so I shall continue. Second round answer to @IvanWerning. I like very much the Werning-Lorenzoni framework. dropbox.com/s/pbsurtd5onvn… One of its merits is indeed to show that thinking in terms of distributional conflict is totally mainstream.
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Serious? yes. Modest? yes. Pedestrian? Maybe. Essential? Absolutely. The low-key, honest, approach to macro modeling for policy by Ray Fair. Capturing the facts, using theory, accepting the limits of our knowledge. cowles.yale.edu/sites/default/…
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How can we have so much political and geopolitical uncertainty and so little economic uncertainty?
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1. A mild disagreement with @paukrugman on the measures to fight global warming in the IRA. It is all subsidies, no taxes. Maybe it was the best that could be achieved politically. But let’s not kid ourselves. It is a sure way to spend more than needed to achieve the desired goal
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The usual argument that markets eventually scare governments in doing the ``right thing'' sounds hollow when there is no government in place to scare.
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The best argument for helicopter money in the Euro area is to get around the fiscal rules. But it is a avenue full of risks, in particular for the ECB. Much better to relax the fiscal rules in the first place. twitter.com/PIIE/status/11…
Robert Solow Professor of economics emeritus, MIT
Fred Bergsten Senior Fellow, Peterson Institute for International Economics