ProGrowthLiberal: Robert Barro’s Misstated Case for Federal Reserve Independence http://econospeak.blogspot.com/2019/08/barros-misstated-case-for-federal.html: "There are two aspects of his case that strike me as silly to say the least starting with his opening sentence: 'In the early 1980s, the chairman of the US Federal Reserve, Paul Volcker, was able to choke off runaway inflation because he was afforded the autonomy necessary to implement steep interest-rate hikes.' This statement glosses over the fact that we had a macroeconomic mess in 1982... an ill-advised fiscal stimulus initiated the moment St. Reagan took office.... To be fair–Barro continues his magical history tour in a reasonable way until we get this absurdity: 'One could infer the normal rate from the average federal funds rate over time. Between January 1986 and August 2008, it was 4.9%, and the average inflation rate was 2.5% (based on the deflator for personal consumption expenditure), meaning that the average real rate was 2.4%'.... Barro seems to be saying the long-run real interest rate has been the same for the last 23 years. There has been a lot of research to suggest otherwise...


#noted #2019-10-20

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