Tag: Explaining the rise in inflation in 2021

Panel Discussion on Macroeconomics at the American Economic Association Meetings

On January 5, 2025 at the American Economic Association meetings in San Francisco, Jason Furman of Harvard’s Kennedy School, former Federal Reserve Chair Ben Bernanke (now of the Brookings Institution), former Council of Economic Advisers Chair Christina Romer of the University of California, Berkeley, and John Cochrane of Stanford’s Hoover Institition participated in a panel on “Inflation and the Macroeconomy.”

The discussion provides an interesting overview of a number of macroeconomic topics including:

  1. The roles of aggregate demand shocks and aggregate supply shocks in explaining the sharp increase of inflation beginning in the spring of 2021.
  2. The reasons for the Fed’s delay in responding to the increase in inflation.
  3. Why macroeconomic forecasting models and most economists failed to anticipate the rise in inflation.
  4. The role of the Fed’s 2020 monetary policy framework, how the Fed should revise the framework as a result of the review currently underway, and whether the Fed should change its inflation target. (We discuss the Fed’s monetary policy framework in several blog posts, including this one.)
  5. The likely future course of inflation and the potential effects of the Trump Administration’s policies.
  6. The likely consequences of large federal budget deficits.
  7. Threats to Fed independence.

The discussion is fairly long at two hours, but most of it is nontechnical and should be understandable by students who have reached the monetary and fiscal policy chapters of a macroeconomic principles course (Chapters 15 and 16 of Macroeconomics; Chapters 25 and 26 of Economics).

Link