Publication Date: March 1, 2023
With the inflation rate in the United States and many other countries on the rise for over a year and nearing double digits, the Hoover Institution hosted its 2022 conference on monetary policy. Policy makers, market participants, and academic researchers gathered to discuss the situation. Many agreed that low interest rates and high money growth were inappropriate given the high inflation rate and evidence that the United States has recovered from the deep recession induced by the pandemic and its policy response in 2020. The thoughtful papers and the thorough discussions in this volume of conference proceedings illustrate the debate about the reasons for this mismatch, as well as how to get back on track. They reflect a range of opinions and perspectives, including examination of the fiscal shock resulting from the COVID pandemic and the related borrowing and spending; emphasis on the value of adherence to rules versus discretion in setting Fed policy; lessons from history in the spikes in federal expenditures during times of war (including the pandemic) and in the timing of the Fed’s use of its policy instruments; the role of central banks in the emerging inflation crisis; and strategies toward disinflation.
About the Editors
Michael D. Bordo is a visiting fellow at the Hoover Institution; and a Board of Governors Professor of Economics and director of the Center for Monetary and Financial History at Rutgers University.
John H. Cochrane is a senior fellow at the Hoover Institution, a research associate of the National Bureau of Economic Research, and an adjunct scholar of the Cato Institute.
John B. Taylor is a senior fellow at the Hoover Institution; and the Mary and Robert Raymond Professor of Economics and director of the Introductory Economics Center at Stanford University.
Contributors and Discussants: James Bullard, Michael D. Bordo, Jennifer Burns, Richard H. Clarida, John H. Cochrane, Tyler Goodspeed, George J. Hall, Beth Hammack, Arvind Krishnamurthy, Mickey D. Levy, John Lipsky, Ellen R. McGrattan, Monika Piazzesi, Charles I. Plosser, Joshua Rauh, Randal Quarles, Ricardo Reis, Condoleezza Rice, Thomas J. Sargent, Tom Stephenson, Lawrence H. Summers, John B. Taylor, Christopher J. Waller, Kevin Warsh, Volker Wieland
Praise for How Monetary Policy Got Behind the Curve—and How to Get Back
“An invaluable guide to understanding and resolving the current surge in inflation.”
—Mervyn King, former governor, Bank of England
“This timely conference volume encompasses a broad examination of current key monetary policy challenges. Experts provide insights from differing perspectives about the Fed’s belated move away from the zero lower bound, and about how the Fed can again reach its inflation target. Contributors include both current and former Fed officials.”
—John Lipsky, senior fellow, Foreign Policy Institute, School of Advanced International Studies, Johns Hopkins University, and former first deputy managing director, International Monetary Fund
“This timely and substantive volume is simply a must-read for anyone interested in the way forward for US monetary policy. The volume draws on the insights of current and former Fed officials as well as the expertise and insights offered by a who’s who of academic scholars and financial market participants. The essays are uniformly rigorous and accessible.”
—Richard Clarida, C. Lowell Harriss Professor of Economics and International Affairs, Columbia University
Praise for Getting Monetary Policy Back on Track
“An outstanding conference analyzing the sources of the highest US inflation in forty years and the macroeconomic policies necessary to return inflation to target.”
—James Bullard, dean, Daniels School of Business, Purdue University, and former president and CEO, Federal Reserve Bank of St. Louis
“In this wonderful volume, leading thinkers provide their cutting-edge insights into resolving current and thorny monetary policy issues. . . . Highly recommended.”
—Harald Uhlig, Bruce Allen and Barbara Ritzenthaler Professor in Economics and the College, Kenneth C. Griffin Department of Economics, University of Chicago
“Anyone interested in monetary policy and the challenges raised by the surge in inflation during 2021 and 2022 will profit from reading this timely volume.”
—Carl E. Walsh, Distinguished Professor of Economics Emeritus, University of California, Santa Cruz
Praise for Getting Global Monetary Policy on Track
“This outstanding volume is packed with extremely useful insights from many of the foremost experts serving on the front lines of public policy about the recent performance of central banks and the challenges ahead. It is especially timely.”
—Mark G. Duggan, Wayne and Jodi Cooperman Professor of Economics, Stanford University, and former Trione Director, Stanford Institute for Economic Policy Research
“This excellent volume is essential for understanding the recent history of monetary policy and our path forward. Current and former Fed officials and leading academics all offer valuable insight into the consequential policy questions raised by the events of the last three years. Highly recommended.”
—Randal Quarles, chairman and founder, Cynosure Group, and former vice chairman of the Federal Reserve System
“The Hoover monetary policy series is a ‘must read’ for all academics, central bankers, and market professionals who are looking for in-depth analysis together with a broad perspective on global monetary policy before, during, and after the surge of inflation.”
—Volker Wieland, Endowed Chair of Monetary Economics and managing director, Institute for Monetary and Financial Stability, Goethe University, Frankfurt
Preface
Michael D. Bordo, John H. Cochrane, and John B. Taylor
Chapter One: Introductory Remarks
Condoleezza Rice
What Monetary Policy Rules and Strategies Say
Chapter Two: Perspectives on US Monetary Policy
Richard H. Clarida
Chapter Three: A Labor Market View on Inflation
Lawrence H. Summers
Chapter Four: It’s Time to Get Back to Rules-Based Monetary Policy
John B. Taylor
Introductory Remarks: Tom Stephenson
General Discussion: Robert Hall, Terry Anderson, Krishna Guha, Ellen Meade
Fiscal Policy and Other Explanations
Chapter Five: Inflation Past, Present, and Future: Fiscal Shocks, Fed Response, and Fiscal Limits
John H. Cochrane
Chapter Six: How Monetary Policy Got So Far Behind the Curve: The Role of Fiscal Policy
Tyler Goodspeed
Chapter Seven: Current Market Perspectives
Beth Hammack
Introductory Remarks: Charles I. Plosser
General Discussion: Krishna Guha, Mickey D. Levy, James Bullard, Richard H. Clarida, Markos Kounalakis
The Fed’s Delayed Exits from Monetary Ease
Chapter Eight: The Fed’s Monetary Policy Exit Once Again Behind the Curve
Michael D. Bordo and Mickey D. Levy
Discussant Remarks: Jennifer Burns
Introductory Remarks: Kevin Warsh
General Discussion: Ricardo Reis, Richard H. Clarida, James Bullard
Chapter Nine: The Burst of High Inflation in 2021–22: How and Why Did We Get Here?
Ricardo Reis
Discussant Remarks: Volker Wieland
Introductory Remarks: Arvind Krishnamurthy
General Discussion: Robert Hall, James Bullard, Patrick Kehoe, Marc Katz, Elena Pastorino
World Wars: Fiscal-Monetary Consequences
Chapter Ten: Financing Big US Federal Expenditures Surges: COVID-19 and Earlier US Wars
George J. Hall and Thomas J. Sargent
Discussant Remarks: Ellen R. McGrattan
Introductory Remarks: John Lipsky
General Discussion: James Bullard, Krishna Guha, Michael D. Bordo, William Nelson, Robert Hall, John H. Cochrane, Patrick Kehoe
Toward a Monetary Policy Strategy
Chapter Eleven: Is the Fed “Behind the Curve”? Two Interpretations
James Bullard
Chapter Twelve: Strategy and Execution in US Monetary Policy 2021–22
Randal Quarles
Chapter Thirteen: Reflections on Monetary Policy in 2021
Christopher J. Waller
Introductory Remarks: Joshua Rauh
General Discussion: David H. Papell, Mickey D. Levy, Tyler Goodspeed, John A. Gunn, John H. Cochrane, Nick Timiraos, Andrew Levin, William Nelson
Chapter Fourteen: Inflation Blues: The Fortieth-Anniversary Revival?
Monika Piazzesi
General Discussion: James Bullard, Krishna Guha, Arvind Krishnamurthy, Axel Merk, David H. Papell
About the Hoover Institution’s Economic Policy Working Group
