DRAFT: Did Macroeconomic Policy Play a Different Role in the (Post-2009) Recovery?: References
CAPE, Future Expected Equity Returns, the Equity Premium, and Market Timing

DRAFT: Did Macroeconomic Policy Play a Different Role in the (Post-2009) Recovery?

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J. Bradford DeLong
U.C. Berkeley
October 15, 2016

Federal Reserve Bank of Boston
60th Economic Conference
The Elusive “Great” Recovery: Causes and Implications for Future Business Cycle Dynamics

Abstract: How has macroeconomic policy been different in this recovery? In banking and regulatory policy, it has been distinguished from earlier patterns—or from what we thought earlier patterns implied for a shock this large and this persistent—in a relative unwillingness to apply the “penalty rate” part of the Bagehot Rule and in a slowness to restructure housing finance that are, for me at least, different than I had expected. In fiscal policy, the prolonged reign of austerity in an environment in which both classical and Keynesian principles suggest that it is time to run up the debt is surprising and unexpected, to me at least. In monetary policy it is more difficult to say what has been different and surprising in this recovery. There have been so many aspects of monetary policy and our expectations of what policy would be during a prolonged excursion to the zero lower bound that it is hard enough merely to say what monetary policy has been, and too much to ask how it has been different from whatever baseline view of what the policy rule would be that we ought to have held back in 2008.