MPDD Seminar Series on How Macroeconomics has evolved Before and After the Global Crisis
by
Professor Assaf Razin Friedman Professor of International Economics, Cornell University and Professor Emeritus, Tel Aviv University
Monday, 18 July 2011
13:30-15:00 hours
MPDD Meeting Room
7th Floor Block B, Secretariat Building
United Nations
Bangkok, Thailand
Conventional wisdom 2000-2008 held that business cycle oscillations were primarily caused by productivity shocks that lasted until price- and wage-setters disentangled real from nominal effects.[1] These shocks sometimes generated inflation which it was believed was best addressed with monetary policy. Accordingly, central bankers were tasked with the mission of maintaining slow and stable inflation. Zero inflation and deflation were shunned because they purportedly were incompatible with full capacity employment. Although central bankers were supposed to be less concerned with real economic activity, many came to believe that full employment and two percent inflation could be sustained indefinitely by "divine coincidence." This miracle was said to be made all the better by the discovery that real economic performance could be regulated with a single monetary instrument, the short term interest. Happily, arbitrage across time meant that central bankers could control all temporal interest rates, and arbitrage across asset classes implied that the Federal Reserve(Fed) could similarly influence risk adjusted rates for diverse securities. Fiscal policy, which had ruled the roost under the influence of orthodox Keynesianism from 1950-80 in this way was relegated to a subsidiary role aided by theorists beliefs in the empirical validity of Ricardian equivalence arguments, and skepticism about lags and political priorities. The financial sector likewise was given short shift, but this still left room for other kinds of nonmonetary intervention.
Following the 2008 global crisis the convergence path of macroeconomists swithched to diverging views with two camps: the "ricardian" and the "keynesian. They have polar opposite views about fiscal expansion and quantitative easings during the prolonged recovery period.
Professor Assaf Razin is the Friedman Professor of International Economics at Cornell University, and Professor Emeritus at Tel Aviv University. He is also a Fellow of the Econometric Society, a Research Associate for the National Bureau of Economic Research (NBER), a Research Fellow for the Center for Economic Policy Research (CEPR), a Research Associate and the Chairman of the Scientific Committee for the Center for Economic Studies (CES-Ifo), and a Fellow of the European Economic Association. He received his BA and MS from the Hebrew University in Jerusalem and his PhD in economics from the University of Chicago and was awarded visiting professorships at several universities including the University of Pennsylvania, Princeton, Harvard, Stanford, and Yale. His research issues include international flows of labor, capital and finance, and macroeconomic policies and growth. His recent books are: Migration and the Welfare State: Political-Economy Policy Formation, with Efraim Sadka and Benjarong Suwankiri, MIT Press, forthcoming 2011; Foreign Direct Investment: Analysis of Aggregate Flow with Efraim Sadka, Princeton University Press, 2007.
[1] Robert Lucas, Jr., “An Equilibrium Model of the Business Cycle,” Journal of Political Economy, 83, December 1975, pp. 1113-44.
You and your colleagues are cordially invited to the seminar and particpate in the discussions. To register for the event, please send an email with your name and affiliation to:
escap-mpdd@un.org by Friday 15 July 2011.
Conventional wisdom 2000-2008 held that business cycle oscillations were primarily caused by productivity shocks that lasted until price- and wage-setters disentangled real from nominal effects.