Tag: John Cochrane

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

Hoover Institution Podcast with Lawrence Summers and John Cochrane

Lawrence Summers (Photo from harvardmagazine.com.)
John Cochrane (Photo from hoover.org.)

In several of our blog posts and podcasts, we’ve discussed Lawrence Summers’s forecasts of inflation. Beginning in February 2021, Summers, an economist at Harvard who served as Treasury secretary in the Clinton administration, argued that the United States was likely to experience rates of inflation that would be higher and persist longer than Federal Reserve policymakers were forecasting. In March 2021, the members of the Fed’s Federal Open Market Committee had an average forecast of inflation of 2.4 percent in 2021, falling to 2.0 percent in 2022. (The FOMC projections can be found here.)

In fact, inflation measured by the CPI has been above 5 percent every month since June 2021; the Fed’s preferred measure of inflation—the percentage change in the price index for personal consumption expenditures—has been above 5 percent every month since October 2021. Summers’s forecasts of inflation have turned out to be more accurate than those of the members of the Federal Open Committee. 

In this podcast, Summers discusses his analysis of inflation with four scholars from the Hoover Institution, including economist John Cochrane. Summers explains why he came to believe in early 2021 that inflation was likely to be much higher than generally expected, how long he believes high rates of inflation will persist, and whether the Fed is likely to be able to achieve a soft landing by bringing inflation back to its 2 percent target without causing a recession. The first half of the podcast, in particular, should be understandable to students who have completed the monetary and fiscal policy chapters (Macroeconomics, Chapters 15 and 16; Economics, Chapters 25 and 26).  Background useful for understanding the podcast discussion of monetary policy during the 1970s can be found in Chapter 17, Sections 17.2 and 17.3.