1 00:00:02,480 --> 00:00:15,800 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:18,079 --> 00:00:21,000 Speaker 2: Hello and welcome to another episode of the Authoughts podcast. 3 00:00:21,120 --> 00:00:22,440 Speaker 2: I'm Tracy Alloway. 4 00:00:22,200 --> 00:00:23,759 Speaker 3: And I'm Joe. Why isn't thal Joe? 5 00:00:23,760 --> 00:00:25,360 Speaker 2: We're back in Jackson Hall. 6 00:00:25,280 --> 00:00:26,320 Speaker 3: Jackson Hall. I love it here. 7 00:00:26,480 --> 00:00:29,760 Speaker 2: It's beautiful. It's beautiful, And not only do we get 8 00:00:29,760 --> 00:00:32,640 Speaker 2: a chance to enjoy the gorgeous scenery, we get a 9 00:00:32,760 --> 00:00:34,440 Speaker 2: chance to talk economic policy. 10 00:00:34,560 --> 00:00:37,720 Speaker 3: There's so much going on right now. To see the least, 11 00:00:37,720 --> 00:00:39,839 Speaker 3: we don't need to recapituate. Everyone knows what's going on 12 00:00:39,920 --> 00:00:41,880 Speaker 3: right now. There's so much stuff, whether we're talking about 13 00:00:42,440 --> 00:00:44,720 Speaker 3: macro situation, whether we're talking about whatever. 14 00:00:44,800 --> 00:00:46,920 Speaker 2: I love how you say there's no need to recapitulate 15 00:00:46,920 --> 00:00:48,000 Speaker 2: and then you immediately do it. 16 00:00:48,240 --> 00:00:49,320 Speaker 3: Well, there's just so much going on. 17 00:00:49,520 --> 00:00:51,880 Speaker 2: I think you're hitting on like a couple things. Which 18 00:00:51,920 --> 00:00:54,920 Speaker 2: is there are these different themes floating through the conference, 19 00:00:54,920 --> 00:00:57,920 Speaker 2: So obviously you have uncertainty over what tariffs actually do 20 00:00:58,040 --> 00:01:00,560 Speaker 2: to the economy, like what type of shock are they? 21 00:01:00,840 --> 00:01:04,840 Speaker 2: Do they destroy demand and therefore maybe cause deflation, or 22 00:01:04,920 --> 00:01:07,320 Speaker 2: do they lead to companies passing on those costs and 23 00:01:07,360 --> 00:01:11,280 Speaker 2: cause inflation. There's central bank independence, which everyone wants to 24 00:01:11,280 --> 00:01:14,240 Speaker 2: talk about. And there's obviously the direction of short term 25 00:01:14,280 --> 00:01:15,640 Speaker 2: interest rates. 26 00:01:15,480 --> 00:01:17,839 Speaker 3: And then of course the formal and then of course 27 00:01:17,880 --> 00:01:20,839 Speaker 3: the formal theme of the conference about labor, labor markets 28 00:01:20,840 --> 00:01:23,120 Speaker 3: and all this stuff. So yes, many different things. 29 00:01:22,880 --> 00:01:25,280 Speaker 2: Going on, all right, Well, I am very pleased to 30 00:01:25,280 --> 00:01:28,880 Speaker 2: say that there is in fact one paper that ties 31 00:01:29,000 --> 00:01:32,839 Speaker 2: basically all these themes together. So we have the author 32 00:01:32,880 --> 00:01:35,560 Speaker 2: here and really the perfect guest to Jehan. 33 00:01:35,400 --> 00:01:36,840 Speaker 3: We've wanted to talk to for a long time. 34 00:01:37,000 --> 00:01:40,039 Speaker 2: Absolutely, we're going to be speaking with Emmy Nakamura, a 35 00:01:40,200 --> 00:01:43,240 Speaker 2: professor at Berkeley and the author of a paper being 36 00:01:43,280 --> 00:01:47,480 Speaker 2: presented at Jackson Hole called Beyond the Tailor Rule. So, Emmy, 37 00:01:47,520 --> 00:01:49,320 Speaker 2: thank you so much for coming on all lots, it's 38 00:01:49,320 --> 00:01:51,640 Speaker 2: great to be here. Let's just start what is the. 39 00:01:51,640 --> 00:01:53,480 Speaker 3: Tailor rule before we can go beyond it? 40 00:01:53,560 --> 00:01:57,520 Speaker 4: Yeah, yeah, Well, in nineteen ninety three, John Taylor wrote 41 00:01:57,520 --> 00:02:00,520 Speaker 4: a paper in which he showed that the behavior of 42 00:02:00,520 --> 00:02:03,680 Speaker 4: the Federal Reserve could be described by this remarkably simple 43 00:02:03,760 --> 00:02:06,880 Speaker 4: rule as a function of inflation and what people call 44 00:02:06,920 --> 00:02:08,680 Speaker 4: the output gap, which is sort of a measure of 45 00:02:08,680 --> 00:02:12,359 Speaker 4: how overheated the economy is. And this was very surprising 46 00:02:12,400 --> 00:02:15,080 Speaker 4: to people because people typically think of what the Federal 47 00:02:15,120 --> 00:02:18,320 Speaker 4: Reserve and other central banks do as incredibly complicated, and 48 00:02:18,360 --> 00:02:20,480 Speaker 4: so the surprise was that you could actually describe it 49 00:02:20,520 --> 00:02:23,919 Speaker 4: by something very simple. And since that time, when John 50 00:02:23,960 --> 00:02:27,280 Speaker 4: Taylor wrote his original paper in nineteen ninety three, the 51 00:02:27,360 --> 00:02:30,640 Speaker 4: tailor rule has achieved more or less mythical status within 52 00:02:30,800 --> 00:02:35,840 Speaker 4: economics and the policymaking world. The original paper was mostly descriptive. 53 00:02:36,000 --> 00:02:38,280 Speaker 4: Like I said, it was pointing out that the behavior 54 00:02:38,320 --> 00:02:41,160 Speaker 4: of the Fed, which seemed complicated, could actually be described 55 00:02:41,160 --> 00:02:44,959 Speaker 4: by something really simple. But since then it's really become 56 00:02:45,000 --> 00:02:49,560 Speaker 4: a guide for prescriptive monetary policy. And when central banks 57 00:02:49,560 --> 00:02:52,120 Speaker 4: deviate from the tailor rule, they're often asked to explain 58 00:02:52,200 --> 00:02:55,560 Speaker 4: why this was a major theme in the post COVID 59 00:02:55,720 --> 00:02:57,280 Speaker 4: inflation for example. 60 00:02:57,520 --> 00:02:59,959 Speaker 2: So on that note, could I ask why the tale 61 00:03:00,320 --> 00:03:03,200 Speaker 2: rules specifically and talk to us maybe about the process 62 00:03:03,360 --> 00:03:06,200 Speaker 2: of how these papers come into being a head of 63 00:03:06,280 --> 00:03:07,000 Speaker 2: Jackson hole. 64 00:03:07,680 --> 00:03:10,720 Speaker 4: Why we wrote about the tailor rule. Well, as I said, 65 00:03:10,720 --> 00:03:15,000 Speaker 4: the tailor rule has achieved this incredibly dominant status within 66 00:03:15,120 --> 00:03:18,080 Speaker 4: not only the academic literature and monetari policy, but also 67 00:03:18,120 --> 00:03:23,040 Speaker 4: within the policy community. And yet when I teach students, 68 00:03:23,080 --> 00:03:26,000 Speaker 4: one of the things that's somewhat uncomfortable is that the 69 00:03:26,040 --> 00:03:28,959 Speaker 4: tailor rule doesn't fit all that well over the past 70 00:03:29,040 --> 00:03:32,120 Speaker 4: twenty years. So it fit pretty well during the Greenspan 71 00:03:32,280 --> 00:03:34,480 Speaker 4: period and all the way until about two thousand and 72 00:03:34,520 --> 00:03:37,240 Speaker 4: eight in the United States, but it hasn't fit very 73 00:03:37,240 --> 00:03:39,160 Speaker 4: well since then. First of all, there was the zero 74 00:03:39,200 --> 00:03:41,440 Speaker 4: lower bound period when interest rates were just at zero, 75 00:03:41,840 --> 00:03:44,720 Speaker 4: but it also didn't predict very well either the timing 76 00:03:44,840 --> 00:03:47,720 Speaker 4: or the magnitude of lift off from zero interest rates. 77 00:03:48,160 --> 00:03:50,920 Speaker 4: So given that twenty years is starting to be a 78 00:03:50,960 --> 00:03:53,880 Speaker 4: long time, the question is should we still view this 79 00:03:54,040 --> 00:03:57,320 Speaker 4: as the benchmark for describing monetari policy. And then there's 80 00:03:57,360 --> 00:04:00,680 Speaker 4: this second question about how to think about Goodmane type policy. 81 00:04:00,720 --> 00:04:04,320 Speaker 4: So when John Taylor wrote his original paper, you know, 82 00:04:04,400 --> 00:04:06,600 Speaker 4: it was mostly descriptive paper, but he did point out 83 00:04:06,760 --> 00:04:08,640 Speaker 4: that this was a time period. The time period he 84 00:04:08,680 --> 00:04:11,280 Speaker 4: said was actually only six years. It was from nineteen 85 00:04:11,400 --> 00:04:13,880 Speaker 4: eighty seven to nineteen ninety two, But he pointed out 86 00:04:13,880 --> 00:04:15,320 Speaker 4: that this was a time period a lot of people 87 00:04:15,360 --> 00:04:18,880 Speaker 4: thought of as representing good monetary policy. So while the 88 00:04:18,880 --> 00:04:20,960 Speaker 4: paper was mostly descriptive, he did say, you know, well, 89 00:04:20,960 --> 00:04:22,800 Speaker 4: maybe this is a guiy to good mone type policy too, 90 00:04:22,800 --> 00:04:24,960 Speaker 4: And that's a theme that a lot of people have 91 00:04:25,040 --> 00:04:27,080 Speaker 4: picked up on since then, and we thought it was 92 00:04:27,120 --> 00:04:29,680 Speaker 4: important to sort of reinvestigate that theme. 93 00:04:30,000 --> 00:04:32,640 Speaker 3: But this is funny, right, like, because there is this 94 00:04:32,760 --> 00:04:35,200 Speaker 3: tension of whether it's a descriptive or prescriptive thing. And 95 00:04:35,240 --> 00:04:37,520 Speaker 3: I've heard for years people on TV it's like, oh, 96 00:04:37,640 --> 00:04:39,880 Speaker 3: Taylor Roll says it should be a lot higher, or 97 00:04:39,920 --> 00:04:41,520 Speaker 3: the tailor it should be lower. Whatever. 98 00:04:41,760 --> 00:04:44,359 Speaker 2: We just heard it from Jeff Schmidt the Kansas Fed, right. 99 00:04:44,200 --> 00:04:47,680 Speaker 3: And yet this is all based on basically a sort 100 00:04:47,720 --> 00:04:51,480 Speaker 3: of backing out description of five years of monetary policy 101 00:04:51,480 --> 00:04:53,880 Speaker 3: that six years, six years? Okay, sorry, six year maybe 102 00:04:53,960 --> 00:04:56,160 Speaker 3: not quite So can you talk a little bit more 103 00:04:56,279 --> 00:04:59,279 Speaker 3: about though this. I don't know if it's a debate 104 00:04:59,720 --> 00:05:03,960 Speaker 3: or like, how people think about prescriptive versus descriptive within 105 00:05:04,040 --> 00:05:04,440 Speaker 3: this role. 106 00:05:04,600 --> 00:05:07,600 Speaker 4: So the tension that you're describing is exactly what motivated 107 00:05:07,680 --> 00:05:11,680 Speaker 4: us to write this paper, because it's interesting how a 108 00:05:11,720 --> 00:05:14,240 Speaker 4: framework like this, which is so simple and so powerful 109 00:05:14,520 --> 00:05:17,440 Speaker 4: in terms of describing monetary policy and does say some 110 00:05:17,560 --> 00:05:20,880 Speaker 4: things that are very true about what MONTEI policy should 111 00:05:20,920 --> 00:05:24,120 Speaker 4: do in terms of leaning against inflation, leaning against an overheating. 112 00:05:24,160 --> 00:05:29,440 Speaker 4: Overheating economy can end up becoming maybe more than even 113 00:05:29,480 --> 00:05:33,240 Speaker 4: the author intended as a prescriptive rule. And one of 114 00:05:33,240 --> 00:05:35,320 Speaker 4: the things that we want to remind people of is 115 00:05:35,360 --> 00:05:38,720 Speaker 4: the historical context for when John Taylor's paper was written. 116 00:05:38,760 --> 00:05:40,880 Speaker 4: So it was written in nineteen ninety three. This was 117 00:05:40,880 --> 00:05:43,600 Speaker 4: a period when the FED was coming off some very 118 00:05:43,680 --> 00:05:46,680 Speaker 4: difficult years for monetoi policy. So the nineteen seventies and 119 00:05:46,760 --> 00:05:50,120 Speaker 4: nineteen eighties were very difficult years for monte policy. Inflation 120 00:05:50,240 --> 00:05:52,040 Speaker 4: had been very high in the late nineteen seventies and 121 00:05:52,080 --> 00:05:57,159 Speaker 4: early nineteen eighties. The Fed's reputation was, to say the 122 00:05:57,240 --> 00:06:02,200 Speaker 4: least limited as an inflation fighter. Inflation expectations were not 123 00:06:02,520 --> 00:06:06,080 Speaker 4: nearly as anchored as they are today. So it was 124 00:06:06,120 --> 00:06:08,080 Speaker 4: a very different time, and I think some of the 125 00:06:08,080 --> 00:06:11,960 Speaker 4: context for John Taylor's paper is saying that when you 126 00:06:12,120 --> 00:06:15,400 Speaker 4: have those kinds of reputational challenges, sometimes you kind of 127 00:06:15,440 --> 00:06:17,839 Speaker 4: need to tie yourself to a mask and say we 128 00:06:17,920 --> 00:06:18,560 Speaker 4: are not going to. 129 00:06:18,640 --> 00:06:20,440 Speaker 3: Go to a mathematical rule exactly. 130 00:06:20,720 --> 00:06:23,280 Speaker 4: Because the nineteen seventies are also one of the time 131 00:06:23,320 --> 00:06:27,040 Speaker 4: periods in history which is best known for political pressure 132 00:06:27,080 --> 00:06:30,240 Speaker 4: on the FED, and so in the context of that 133 00:06:30,320 --> 00:06:32,680 Speaker 4: kind of political pressure, one of the things you want 134 00:06:32,720 --> 00:06:35,679 Speaker 4: to think about doing is giving people a very simple, 135 00:06:35,839 --> 00:06:39,880 Speaker 4: observable metric for how you adjust interest rates. But then, 136 00:06:39,920 --> 00:06:43,960 Speaker 4: of course, by you know, several decades later, the Fed's 137 00:06:44,040 --> 00:06:47,919 Speaker 4: reputation had changed pretty dramatically. We had seen decades of 138 00:06:48,000 --> 00:06:51,480 Speaker 4: low and stable inflation, and you know, the FED and 139 00:06:51,520 --> 00:06:55,039 Speaker 4: other central banks around the world had really developed a 140 00:06:55,160 --> 00:06:59,080 Speaker 4: very strong inflation fighting reputation. So then the question arises, 141 00:06:59,400 --> 00:07:02,640 Speaker 4: is the same kind of tying your hands approach appropriate 142 00:07:03,040 --> 00:07:06,160 Speaker 4: even in the context of you know, shocks like what 143 00:07:06,200 --> 00:07:08,880 Speaker 4: we saw after COVID. And so this is the sense 144 00:07:08,880 --> 00:07:10,400 Speaker 4: in which I think, you know, this is a time 145 00:07:10,560 --> 00:07:12,480 Speaker 4: at which we want to ask these questions. 146 00:07:12,920 --> 00:07:15,000 Speaker 2: It reminds me very much of the Psalm rule and 147 00:07:15,040 --> 00:07:18,120 Speaker 2: the arguments there that if you find like a specific number, 148 00:07:18,240 --> 00:07:21,200 Speaker 2: the ideas that you use a sort of simple formula 149 00:07:21,240 --> 00:07:24,440 Speaker 2: and then you immediately jump into action. So on that note, 150 00:07:24,680 --> 00:07:26,720 Speaker 2: one of the key things about the tailor rule is 151 00:07:26,760 --> 00:07:30,240 Speaker 2: that it suggests rates need to rise by more than 152 00:07:30,360 --> 00:07:34,440 Speaker 2: one for one with inflation to properly offset inflation, like 153 00:07:34,480 --> 00:07:37,320 Speaker 2: you have to go in very very strong. But you 154 00:07:37,520 --> 00:07:40,640 Speaker 2: found in your paper that that's not always the case exactly. 155 00:07:40,720 --> 00:07:43,520 Speaker 4: So even beyond the idea that you want to raise 156 00:07:43,560 --> 00:07:46,600 Speaker 4: interest rates more than one for one, so it's the 157 00:07:46,600 --> 00:07:48,680 Speaker 4: coevision's one point five in the tailor rule. But there's 158 00:07:48,720 --> 00:07:51,160 Speaker 4: the idea even beyond that of the tailor principle, which 159 00:07:51,200 --> 00:07:53,520 Speaker 4: is exactly what you described, that you want to not 160 00:07:53,560 --> 00:07:56,680 Speaker 4: only raise interest rates nominal interest rates with inflation, but 161 00:07:56,760 --> 00:07:58,400 Speaker 4: you want to raise real interest rates. And if you 162 00:07:58,440 --> 00:07:59,920 Speaker 4: want to raise real interest rates, then you have to 163 00:08:00,200 --> 00:08:02,559 Speaker 4: is nominal interest rates more than one for one, exactly 164 00:08:02,600 --> 00:08:03,960 Speaker 4: what you said, and so that's kind of a core 165 00:08:04,040 --> 00:08:07,480 Speaker 4: idea and it's one of the main reasons why the 166 00:08:07,560 --> 00:08:11,520 Speaker 4: gap between the tailor rule prescription and what central banks 167 00:08:11,600 --> 00:08:14,640 Speaker 4: actually did during the COVID inflation was so large. And 168 00:08:14,680 --> 00:08:16,640 Speaker 4: actually for the United States this gap was about it 169 00:08:16,760 --> 00:08:19,000 Speaker 4: was over ten percentage points, so we are talking about 170 00:08:19,160 --> 00:08:21,480 Speaker 4: a very large gap and the COVID inflation saw the 171 00:08:21,600 --> 00:08:25,640 Speaker 4: largest gap in history. So why does that not actually 172 00:08:25,680 --> 00:08:29,400 Speaker 4: happen always in monetary theory, Well, the reason is because 173 00:08:29,440 --> 00:08:32,520 Speaker 4: there are different sources of inflation. So the motivation for 174 00:08:32,600 --> 00:08:35,920 Speaker 4: leading hard against inflation that is probably pretty intuitive to 175 00:08:35,960 --> 00:08:39,480 Speaker 4: most people is demand driven inflation. So when inflation is 176 00:08:39,520 --> 00:08:43,640 Speaker 4: coming from an overheating economy, then there's this notion in 177 00:08:43,720 --> 00:08:47,440 Speaker 4: monetary economics that you can satisfy all objectives of both 178 00:08:47,520 --> 00:08:50,040 Speaker 4: kind of calming down the economy but also keeping inflation 179 00:08:50,080 --> 00:08:53,760 Speaker 4: in check by raising interest rates pretty aggressively and actually 180 00:08:54,080 --> 00:08:56,520 Speaker 4: optal monetary policy theory implies you might even want to 181 00:08:56,559 --> 00:08:59,199 Speaker 4: be more aggressive than the tailor rule. But in contrast, 182 00:08:59,240 --> 00:09:01,800 Speaker 4: when you have shot to inflation that don't come directly 183 00:09:01,800 --> 00:09:05,800 Speaker 4: from an overheating economy but also come from you know, 184 00:09:05,840 --> 00:09:08,319 Speaker 4: other sources of increases in costs, you know, so the 185 00:09:08,360 --> 00:09:11,400 Speaker 4: supply shocks that people talked about during the COVID inflation period, 186 00:09:11,760 --> 00:09:15,679 Speaker 4: then these same models can imply very different predictions. They 187 00:09:15,679 --> 00:09:18,760 Speaker 4: can imply that you don't want to raise interest rates 188 00:09:18,800 --> 00:09:21,960 Speaker 4: nearly so much in response to inflation associated with these 189 00:09:22,040 --> 00:09:24,280 Speaker 4: kinds of shocks. So in our paper, what we do 190 00:09:24,440 --> 00:09:27,840 Speaker 4: is we use a very standard monetary model, and we 191 00:09:27,920 --> 00:09:31,200 Speaker 4: simulate data from this model where we assume that the 192 00:09:31,240 --> 00:09:34,520 Speaker 4: monetary policy is actually exactly optimal, so the centerflike is 193 00:09:34,559 --> 00:09:37,400 Speaker 4: really doing the right thing, and then we run regressions, 194 00:09:37,480 --> 00:09:39,800 Speaker 4: you know, where we try to estimate what we get 195 00:09:39,800 --> 00:09:41,360 Speaker 4: for the tailor role in this context. And then the 196 00:09:41,400 --> 00:09:44,240 Speaker 4: interesting observation is that you find that actually a lot 197 00:09:44,280 --> 00:09:47,600 Speaker 4: of times the coefficient on inflation is less than one. 198 00:09:47,920 --> 00:09:50,080 Speaker 4: Sometimes it's close to zero, sometimes it's even negative. So 199 00:09:50,280 --> 00:09:53,319 Speaker 4: really a lot of things can happen when you deviate 200 00:09:53,559 --> 00:09:56,160 Speaker 4: only from this view of inflation is coming from an 201 00:09:56,160 --> 00:10:10,880 Speaker 4: overheating economy. 202 00:10:12,920 --> 00:10:14,080 Speaker 3: Did the FED do a good job? 203 00:10:14,840 --> 00:10:17,040 Speaker 2: The paper reads like vindication. 204 00:10:16,720 --> 00:10:19,559 Speaker 3: Yeah, because I think in twenty twenty five there's still 205 00:10:19,600 --> 00:10:21,480 Speaker 3: plenty of fights about this question, what's your fake? 206 00:10:21,720 --> 00:10:25,200 Speaker 4: I think in so we don't know what's going to happen. Yeah, 207 00:10:25,840 --> 00:10:28,000 Speaker 4: but I think in the long span of history, if 208 00:10:28,040 --> 00:10:30,360 Speaker 4: you look at what happened over the past five years, 209 00:10:30,400 --> 00:10:32,040 Speaker 4: I think this is going to look like a soft landing, 210 00:10:32,800 --> 00:10:36,760 Speaker 4: and that is typically exactly what the Federal Reserve is 211 00:10:36,800 --> 00:10:40,959 Speaker 4: trying to achieve. So, I mean, obviously, the FED appropriately 212 00:10:41,000 --> 00:10:43,880 Speaker 4: and private sector forecasters took a lot of flak for 213 00:10:44,000 --> 00:10:47,240 Speaker 4: saying that inflation was going to be very transitory when 214 00:10:47,280 --> 00:10:50,920 Speaker 4: inflation was significantly more persistent. That said, inflation did come 215 00:10:50,960 --> 00:10:55,120 Speaker 4: down very quickly, and there hasn't been a recession, and 216 00:10:55,240 --> 00:10:58,840 Speaker 4: that is remarkable. Not only has there not been a recession, 217 00:10:59,040 --> 00:11:01,040 Speaker 4: and not only didn't place and come down very quickly, 218 00:11:01,080 --> 00:11:04,760 Speaker 4: but longer term inflation expectations really did not become unhinged. 219 00:11:04,800 --> 00:11:09,880 Speaker 4: Despite this historic increase in inflation, we haven't seen large 220 00:11:09,920 --> 00:11:13,240 Speaker 4: increases in longer term bond yields. So this is all 221 00:11:13,600 --> 00:11:16,720 Speaker 4: pretty remarkable, and I would think that if things go 222 00:11:16,840 --> 00:11:19,400 Speaker 4: well over the next five years, that in the longer 223 00:11:19,440 --> 00:11:20,920 Speaker 4: at amount of history, this is going. 224 00:11:20,800 --> 00:11:21,880 Speaker 3: To look like a big success. 225 00:11:22,320 --> 00:11:26,679 Speaker 2: So this is where central bank independence and credibility actually 226 00:11:26,679 --> 00:11:29,600 Speaker 2: comes into play when it comes to those longer term 227 00:11:29,720 --> 00:11:35,079 Speaker 2: inflation expectations. How did you actually measure credibility in this paper? 228 00:11:35,120 --> 00:11:36,959 Speaker 2: Because you don't look just at the FED, you look 229 00:11:36,960 --> 00:11:37,840 Speaker 2: at a bunch of other. 230 00:11:37,679 --> 00:11:41,120 Speaker 4: Central banks, right, So when we look at other central banks, 231 00:11:41,640 --> 00:11:43,319 Speaker 4: one of the things we point out is that there 232 00:11:43,360 --> 00:11:46,000 Speaker 4: was a huge amount of variation in terms of how 233 00:11:46,120 --> 00:11:50,040 Speaker 4: different central banks reacted to the COVID inflation. So we've 234 00:11:50,080 --> 00:11:53,960 Speaker 4: been talking about the United States and similarly countries like Japan, 235 00:11:54,160 --> 00:11:57,560 Speaker 4: the UK, the Euro Area. These countries all raised interest 236 00:11:57,640 --> 00:12:02,240 Speaker 4: rates very gradually and by very moderate amounts relative to 237 00:12:02,320 --> 00:12:05,440 Speaker 4: the size of the inflation increases they were facing, and 238 00:12:05,480 --> 00:12:07,760 Speaker 4: so they all took a lot of flack for raising 239 00:12:07,800 --> 00:12:10,800 Speaker 4: interest rates too slowly, for being behind the curve, for 240 00:12:10,840 --> 00:12:13,520 Speaker 4: not raising interest rates enough. And these are the countries 241 00:12:13,559 --> 00:12:17,320 Speaker 4: we refer to in our paper as late risers because 242 00:12:17,320 --> 00:12:19,360 Speaker 4: they were late to the game right. But there were 243 00:12:19,440 --> 00:12:21,760 Speaker 4: other countries in the world we referred to as early 244 00:12:21,880 --> 00:12:25,400 Speaker 4: risers who raised interest rates a lot more aggressively and 245 00:12:25,520 --> 00:12:29,880 Speaker 4: a lot earlier. And the interesting observation. You might have 246 00:12:29,920 --> 00:12:33,199 Speaker 4: thought that these countries would have suffered from the fact 247 00:12:33,440 --> 00:12:35,720 Speaker 4: the late riser countries would have suffered from the fact 248 00:12:35,720 --> 00:12:38,480 Speaker 4: that they relate to the game in raising interest rates 249 00:12:38,480 --> 00:12:41,440 Speaker 4: with having higher inflation than the early risers who responded 250 00:12:41,480 --> 00:12:44,679 Speaker 4: very aggressively, and in fact we find the opposite. So 251 00:12:44,720 --> 00:12:47,560 Speaker 4: the early risers did respond very aggressively the COVID inflation, 252 00:12:47,679 --> 00:12:50,560 Speaker 4: but they actually saw inflation rise by a lot more 253 00:12:50,640 --> 00:12:53,000 Speaker 4: during this episode. So then we asked the question, well, 254 00:12:53,000 --> 00:12:55,080 Speaker 4: what could explain that seems sort of backwards? You know, 255 00:12:55,120 --> 00:12:57,240 Speaker 4: you have these countries that seemed to have responded very 256 00:12:57,280 --> 00:12:59,959 Speaker 4: aggressively with interest rates and yet they saw the large 257 00:13:00,120 --> 00:13:03,520 Speaker 4: and more persistent inflationary surges. But then what we see 258 00:13:03,640 --> 00:13:07,199 Speaker 4: is that those same countries are countries that have much 259 00:13:07,360 --> 00:13:11,800 Speaker 4: more checkered inflation histories. So you asked about reputation, Well, 260 00:13:11,840 --> 00:13:15,560 Speaker 4: a very simple way to ask about the reputation of 261 00:13:15,640 --> 00:13:18,280 Speaker 4: a central bank for controlling inflation is just to look 262 00:13:18,360 --> 00:13:21,920 Speaker 4: at average inflation in the recent decades. And so we 263 00:13:22,000 --> 00:13:25,199 Speaker 4: look at average inflation over the previous three decades, and 264 00:13:25,240 --> 00:13:28,480 Speaker 4: we see that the early riser countries, the ones that 265 00:13:28,800 --> 00:13:31,439 Speaker 4: you know probably felt they had to respond ery aggressively 266 00:13:31,480 --> 00:13:35,800 Speaker 4: to the COVID inflation, also had much more checkered inflation histories. 267 00:13:35,840 --> 00:13:39,240 Speaker 4: They had much higher average inflation over the past three 268 00:13:39,280 --> 00:13:42,760 Speaker 4: decades previous to COVID, And so I think a natural 269 00:13:42,800 --> 00:13:46,240 Speaker 4: interpretation of these facts is that for these countries, they 270 00:13:46,280 --> 00:13:50,400 Speaker 4: did not feel that they had the inflation fighting credibility 271 00:13:51,000 --> 00:13:53,679 Speaker 4: of the central banks in the United States or in 272 00:13:53,760 --> 00:13:56,040 Speaker 4: Japan or in the Euro Area. They did not feel 273 00:13:56,040 --> 00:13:59,640 Speaker 4: that they had the kind of strongly anchored inflation expectations 274 00:13:59,720 --> 00:14:02,920 Speaker 4: that these countries could benefit from. And so for these countries, 275 00:14:02,920 --> 00:14:05,560 Speaker 4: it really probably was not an option to think that 276 00:14:05,600 --> 00:14:09,439 Speaker 4: they could look through the inflation and yet keep inflation 277 00:14:09,520 --> 00:14:13,120 Speaker 4: expectations anchored. But yet that is actually what happened in 278 00:14:13,360 --> 00:14:16,160 Speaker 4: the United States and several other of these late riser countries. 279 00:14:16,440 --> 00:14:19,760 Speaker 3: So I find this to be really fascinating. I want 280 00:14:19,800 --> 00:14:22,360 Speaker 3: to get to the question of like whether the develop 281 00:14:22,440 --> 00:14:25,200 Speaker 3: market or the US is like ground down its stock 282 00:14:25,240 --> 00:14:27,000 Speaker 3: of credibility over the last five years, But I wanted 283 00:14:27,000 --> 00:14:30,600 Speaker 3: to on this question of the early risers. I get 284 00:14:30,640 --> 00:14:33,160 Speaker 3: what you're saying, but it's still not intuitive to me 285 00:14:33,880 --> 00:14:36,640 Speaker 3: that the countries or the central banks with a sort 286 00:14:36,640 --> 00:14:40,880 Speaker 3: of mediocre history of controlling inflation this time around were 287 00:14:40,920 --> 00:14:44,280 Speaker 3: really on the ball in unison. I mean, I would 288 00:14:44,320 --> 00:14:47,080 Speaker 3: think that if a central bank has a history of 289 00:14:47,280 --> 00:14:50,600 Speaker 3: missing its inflation target or letting inflation rise, that at 290 00:14:50,680 --> 00:14:52,760 Speaker 3: least some of them would have done it again. They 291 00:14:52,760 --> 00:14:55,720 Speaker 3: would have come in late, because that's what they do institutionally. 292 00:14:55,800 --> 00:14:58,960 Speaker 3: Like how consistent is this process around the world, whereby 293 00:14:59,000 --> 00:15:02,200 Speaker 3: the countries that have a track record were early risers 294 00:15:02,200 --> 00:15:02,680 Speaker 3: this time. 295 00:15:02,560 --> 00:15:05,240 Speaker 4: Around, right, So we're not including every country, So there 296 00:15:05,240 --> 00:15:08,280 Speaker 4: are some countries which are outliers in terms of their 297 00:15:09,320 --> 00:15:11,280 Speaker 4: in terms of their response in terms of their inflation. 298 00:15:11,840 --> 00:15:13,280 Speaker 4: But I think one of the things you have to 299 00:15:13,320 --> 00:15:16,480 Speaker 4: recognize is that in the world as a whole, there 300 00:15:16,520 --> 00:15:19,480 Speaker 4: has been quite a remarkable sort of triumph of central 301 00:15:19,480 --> 00:15:22,840 Speaker 4: banks over inflation. So back in the nineteen seventies and 302 00:15:22,920 --> 00:15:26,800 Speaker 4: nineteen eighties, almost every country was like what we see 303 00:15:26,800 --> 00:15:29,600 Speaker 4: in the early risers today. So none of these countries 304 00:15:29,720 --> 00:15:34,280 Speaker 4: had really strong credentials as inflation fighters. And more recently 305 00:15:34,960 --> 00:15:36,640 Speaker 4: there are a number of these countries which are kind 306 00:15:36,640 --> 00:15:39,840 Speaker 4: of moving in the direction of having much stronger inflation 307 00:15:40,000 --> 00:15:43,480 Speaker 4: fighting credentials. But at the same time, you know, these 308 00:15:43,520 --> 00:15:47,080 Speaker 4: are countries where it's a relatively fresh history, you know. 309 00:15:47,160 --> 00:15:48,840 Speaker 4: So you look at some of these countries where they 310 00:15:48,840 --> 00:15:51,800 Speaker 4: had pretty high inflation in the past, yeah, and you know, 311 00:15:51,800 --> 00:15:53,640 Speaker 4: and there's just sort of starting to be able to 312 00:15:53,640 --> 00:15:55,640 Speaker 4: get over it. And then the question is do you 313 00:15:55,720 --> 00:15:58,600 Speaker 4: think that the public will be willing to watch you 314 00:15:58,680 --> 00:16:02,760 Speaker 4: go through a period of say, ten percent inflation and say, oh, 315 00:16:02,840 --> 00:16:05,080 Speaker 4: we're sure you're going to get it back to two percent, 316 00:16:05,480 --> 00:16:06,880 Speaker 4: or do you think you know, there's going to be 317 00:16:07,040 --> 00:16:08,280 Speaker 4: real question of whether you're going to be able to 318 00:16:08,280 --> 00:16:08,640 Speaker 4: achieve that. 319 00:16:09,240 --> 00:16:11,480 Speaker 2: Okay, So if on the other hand, you do have 320 00:16:11,560 --> 00:16:15,400 Speaker 2: good credibility, you do have a good history of inflation fighting, 321 00:16:15,600 --> 00:16:19,080 Speaker 2: then you can kind of spend that social capital, I guess, 322 00:16:19,480 --> 00:16:22,800 Speaker 2: and avoid having to raise interest rates by as much 323 00:16:22,840 --> 00:16:25,520 Speaker 2: as you know, maybe another central bank that doesn't have 324 00:16:25,560 --> 00:16:29,680 Speaker 2: that credibility walk us through what exactly are the benefits 325 00:16:29,920 --> 00:16:31,320 Speaker 2: of not having to do. 326 00:16:31,200 --> 00:16:36,040 Speaker 4: That, of not having to raise race rise Absolutely well, 327 00:16:36,040 --> 00:16:39,920 Speaker 4: you get closer to optimal monetary policy. So in the models, 328 00:16:40,000 --> 00:16:43,520 Speaker 4: you know, the basic idea is, for example, if you 329 00:16:43,600 --> 00:16:45,640 Speaker 4: have one of these cost push shocks, where there's a 330 00:16:45,680 --> 00:16:49,000 Speaker 4: shock that is going directly to inflation because of increases 331 00:16:49,040 --> 00:16:52,280 Speaker 4: in costs or bottlenecks of various types, or you have 332 00:16:52,320 --> 00:16:55,440 Speaker 4: a shock like during COVID to people's demand for goods 333 00:16:55,480 --> 00:16:58,600 Speaker 4: versus services. If you raise the interest rate dramatically, like 334 00:16:58,600 --> 00:17:00,520 Speaker 4: the tailor rum might have predicted you, it is interesting 335 00:17:00,560 --> 00:17:02,680 Speaker 4: to ten percent. So what's going to have to happen 336 00:17:02,920 --> 00:17:05,440 Speaker 4: to get inflation down to zero in the short run. Well, 337 00:17:05,440 --> 00:17:07,040 Speaker 4: maybe you're going to have to have a big recession. 338 00:17:07,160 --> 00:17:09,240 Speaker 4: You're going to have to have one part of the 339 00:17:09,280 --> 00:17:10,840 Speaker 4: economy completely collapse. 340 00:17:11,119 --> 00:17:13,399 Speaker 2: You know, Trump will tweet at you more or post 341 00:17:13,440 --> 00:17:14,280 Speaker 2: on truth social more. 342 00:17:14,480 --> 00:17:17,600 Speaker 4: Probably you're going to have to have really negative inflation 343 00:17:17,680 --> 00:17:19,320 Speaker 4: in some sectors of the economy, and you're going to 344 00:17:19,359 --> 00:17:22,240 Speaker 4: have to have a big recession. And potentially, you know 345 00:17:22,280 --> 00:17:24,400 Speaker 4: the other issue is that there's a lot of evidence 346 00:17:24,400 --> 00:17:29,240 Speaker 4: suggesting that monetary policy has pretty delayed effects. So another concern, 347 00:17:29,560 --> 00:17:32,040 Speaker 4: and as I said, you know in this episode, professional 348 00:17:32,040 --> 00:17:35,240 Speaker 4: forecasters and the FED both thought that the inflation would 349 00:17:35,280 --> 00:17:38,360 Speaker 4: be more transitory than it actually was. But another concern 350 00:17:38,720 --> 00:17:41,920 Speaker 4: is if you think that the shocks that are causing 351 00:17:41,960 --> 00:17:44,600 Speaker 4: the inflation are sort of going to dissipate on their own, 352 00:17:44,680 --> 00:17:46,760 Speaker 4: and you think that monetary policy has going to take 353 00:17:46,800 --> 00:17:49,240 Speaker 4: some time to have an effect, then one of the 354 00:17:49,280 --> 00:17:52,480 Speaker 4: concerns is that by the time the monetary policy actually 355 00:17:52,480 --> 00:17:55,000 Speaker 4: has a large effect, then you know, some of these 356 00:17:55,000 --> 00:17:57,560 Speaker 4: shocks are going to dissipate. And then I guess the 357 00:17:57,600 --> 00:18:01,760 Speaker 4: third thing I would mention is that in theory, the 358 00:18:01,800 --> 00:18:04,639 Speaker 4: central bank actually wants to use a combination not only 359 00:18:04,680 --> 00:18:07,800 Speaker 4: of current interest rate movements but also a forward guidance. 360 00:18:08,080 --> 00:18:10,800 Speaker 4: So this is one of the big innovations in monetary 361 00:18:10,920 --> 00:18:14,359 Speaker 4: policy over recent decades. We think about forward guidance a 362 00:18:14,400 --> 00:18:17,160 Speaker 4: lot in the context of the zero lower bound, when 363 00:18:17,240 --> 00:18:19,760 Speaker 4: you can't do anything with FED funds rate, and so 364 00:18:19,800 --> 00:18:22,359 Speaker 4: it's all about forward guidance, but actually forward guidance is 365 00:18:22,359 --> 00:18:25,600 Speaker 4: a much much more general phenomenon. It's really whenever the 366 00:18:25,600 --> 00:18:28,399 Speaker 4: central bank is calling it shots about what it's going 367 00:18:28,440 --> 00:18:30,560 Speaker 4: to do with interest rates, even over the next year. 368 00:18:30,720 --> 00:18:35,000 Speaker 4: So this was hugely important during the COVID inflation research, 369 00:18:35,119 --> 00:18:40,160 Speaker 4: because the FED started talking about raising interest rates and 370 00:18:40,280 --> 00:18:43,600 Speaker 4: a longer term bond yield started rising pretty rapidly in 371 00:18:43,680 --> 00:18:47,160 Speaker 4: late twenty twenty one, substantially before the FED funds rate 372 00:18:47,160 --> 00:18:51,399 Speaker 4: actually started to rise rapidly. And in the theory, a 373 00:18:51,440 --> 00:18:53,840 Speaker 4: central bank that has that power, it has the ability 374 00:18:53,880 --> 00:18:56,800 Speaker 4: to affect the economy not just through what it does 375 00:18:57,080 --> 00:19:00,119 Speaker 4: with the FED funds rate, but also through its words 376 00:19:00,160 --> 00:19:02,480 Speaker 4: an impact on the bond market. Through that channel, we'll 377 00:19:02,480 --> 00:19:05,480 Speaker 4: actually want to use both. And so that's another advantage 378 00:19:05,560 --> 00:19:07,440 Speaker 4: of not being bound by these kinds of constraints. 379 00:19:07,440 --> 00:19:10,840 Speaker 3: The strikes me is an incredibly important point, which is 380 00:19:11,000 --> 00:19:14,840 Speaker 3: that you can tighten monetary policy by talking, by saying, 381 00:19:15,119 --> 00:19:18,080 Speaker 3: and so that just by looking at that overnight rate 382 00:19:18,160 --> 00:19:21,720 Speaker 3: that the rule might anticipate, et cetera, does not necessarily 383 00:19:21,800 --> 00:19:24,639 Speaker 3: capture the stance of monetary at that time if you're 384 00:19:24,640 --> 00:19:28,239 Speaker 3: already indicated and you're pulling forward those raid hikes. So 385 00:19:28,320 --> 00:19:30,080 Speaker 3: do we have less credibility today? 386 00:19:30,200 --> 00:19:30,399 Speaker 4: You know? 387 00:19:30,520 --> 00:19:33,040 Speaker 3: So, Okay, maybe the FED did a good job in 388 00:19:33,040 --> 00:19:36,919 Speaker 3: this time. Nonetheless, there was this very big inflationary episode, 389 00:19:36,920 --> 00:19:40,440 Speaker 3: et cetera. So after years of very cool inflation, finally 390 00:19:40,520 --> 00:19:43,600 Speaker 3: we got a big one. Going forward, does that mean 391 00:19:43,680 --> 00:19:46,560 Speaker 3: the next time around, if there is another inflationary shock 392 00:19:46,640 --> 00:19:50,520 Speaker 3: for whatever reason, that the FED might be impelled to 393 00:19:50,560 --> 00:19:52,879 Speaker 3: be more of an early riser than it felt in 394 00:19:52,920 --> 00:19:53,399 Speaker 3: this cycle. 395 00:19:53,720 --> 00:19:57,240 Speaker 4: I would think almost definitely yes. Remember that going into 396 00:19:57,520 --> 00:20:02,080 Speaker 4: the COVID inflation, you know, regular pe hadn't seen significant 397 00:20:02,080 --> 00:20:06,320 Speaker 4: amounts of inflation for years. It just wasn't really part 398 00:20:06,480 --> 00:20:10,200 Speaker 4: of the mindset of anyone. You know, when you saw, 399 00:20:10,280 --> 00:20:14,840 Speaker 4: for example, unions, in wage negotiations or other contexts things 400 00:20:14,840 --> 00:20:17,240 Speaker 4: where inflation should have been relevant, it was sort of 401 00:20:17,280 --> 00:20:20,320 Speaker 4: striking that it just wasn't on anyone's mind. And it 402 00:20:20,400 --> 00:20:23,320 Speaker 4: even took a while after the inflation started for people 403 00:20:23,359 --> 00:20:25,879 Speaker 4: to even think about this, because it had become so 404 00:20:26,040 --> 00:20:28,680 Speaker 4: much of a non issue for so many years that 405 00:20:28,800 --> 00:20:31,280 Speaker 4: it was just not part of the mental frame of Americans. 406 00:20:31,560 --> 00:20:34,520 Speaker 4: I see this very much when I teach students, because 407 00:20:34,760 --> 00:20:37,760 Speaker 4: for American students, typically I have to do a lot 408 00:20:37,800 --> 00:20:40,080 Speaker 4: of work to just explain the difference, for example, between 409 00:20:40,080 --> 00:20:41,480 Speaker 4: a nominal interest rate and a real interest. 410 00:20:41,680 --> 00:20:44,040 Speaker 2: I did not earn interest on my bank account for 411 00:20:44,119 --> 00:20:46,240 Speaker 2: most of my adult life, so. 412 00:20:46,160 --> 00:20:49,000 Speaker 4: I see exactly. But in contrast, for Latin American students, 413 00:20:49,000 --> 00:20:51,080 Speaker 4: they get in immediately because it's just part of how 414 00:20:51,080 --> 00:20:54,120 Speaker 4: they grew up, right, And I think that that distinction 415 00:20:54,640 --> 00:20:57,840 Speaker 4: has probably blurred at least a little bit, right because 416 00:20:57,880 --> 00:21:00,720 Speaker 4: now people have gone through a few years where it 417 00:21:00,760 --> 00:21:03,280 Speaker 4: mattered to pay a little bit of attention to inflation. 418 00:21:03,480 --> 00:21:06,159 Speaker 4: And so my guess is that if we start to 419 00:21:06,200 --> 00:21:09,240 Speaker 4: see inflation again, it's going to be, you know, a 420 00:21:09,320 --> 00:21:12,399 Speaker 4: much more rapid transition to where people will start to 421 00:21:12,400 --> 00:21:16,280 Speaker 4: ask whether this is going to last longer, whether now 422 00:21:16,320 --> 00:21:19,480 Speaker 4: that we've seen you know, two inflationary episodes in the 423 00:21:19,480 --> 00:21:22,000 Speaker 4: recent past, whether this is sort of the new normal. 424 00:21:22,520 --> 00:21:25,399 Speaker 4: You know. I think it's important not to forget how 425 00:21:25,840 --> 00:21:29,680 Speaker 4: hard one those expectations of low inflation were for the 426 00:21:29,760 --> 00:21:32,560 Speaker 4: Federal Reserve in many other countries. You know, it's certainly 427 00:21:32,600 --> 00:21:34,200 Speaker 4: something that can dissipate. 428 00:21:35,320 --> 00:21:38,720 Speaker 2: So, because we're dealing with the tailor rule, which basically, 429 00:21:38,800 --> 00:21:42,680 Speaker 2: you know, suggests or describes either way, what the central 430 00:21:42,720 --> 00:21:45,240 Speaker 2: bank should do with interest rates in response to inflation 431 00:21:45,440 --> 00:21:49,720 Speaker 2: and changes in the output gap. We're talking basically about 432 00:21:49,720 --> 00:21:54,640 Speaker 2: like the impact of shocks to that output gap. There's 433 00:21:54,640 --> 00:21:57,199 Speaker 2: a nuance here because like shocks can be different and 434 00:21:57,240 --> 00:22:00,480 Speaker 2: have different effects on the output gap. What type of 435 00:22:00,560 --> 00:22:04,000 Speaker 2: shock would tariffs be? I know this isn't the subject 436 00:22:04,040 --> 00:22:06,560 Speaker 2: of your paper, but you know your gut instinct, how 437 00:22:06,560 --> 00:22:09,320 Speaker 2: would you describe tariffs in terms of that economic shock 438 00:22:09,359 --> 00:22:10,439 Speaker 2: and the impact on output? 439 00:22:10,600 --> 00:22:13,399 Speaker 4: So there have been a number of recent academic papers 440 00:22:13,400 --> 00:22:15,600 Speaker 4: on this. It's not the focus of our paper, but 441 00:22:15,680 --> 00:22:19,280 Speaker 4: I think that the overall message of those papers is 442 00:22:19,320 --> 00:22:21,679 Speaker 4: that you do want to look through sort of the 443 00:22:21,720 --> 00:22:24,199 Speaker 4: initial impact of the tariffs, but you don't want to 444 00:22:24,200 --> 00:22:26,639 Speaker 4: look through sort of second round effects. So to the 445 00:22:26,720 --> 00:22:29,439 Speaker 4: extent that you start to see an effect in terms 446 00:22:29,440 --> 00:22:32,880 Speaker 4: of longer run inflation expectations becoming unhinged and so on, 447 00:22:33,280 --> 00:22:35,960 Speaker 4: that's the part of the inflation that the central bank 448 00:22:35,960 --> 00:22:37,960 Speaker 4: would want to be responding aggressively to. 449 00:22:53,880 --> 00:22:56,399 Speaker 3: I have another question that maybe outside the scope of 450 00:22:56,440 --> 00:22:58,000 Speaker 3: this specific paper, but. 451 00:22:58,240 --> 00:23:00,000 Speaker 2: It has a lot of relevance to today. 452 00:23:00,119 --> 00:23:02,719 Speaker 3: There's a lot when you think about around the world, 453 00:23:03,040 --> 00:23:06,320 Speaker 3: some central banks have more credibility than some others. Is 454 00:23:06,359 --> 00:23:09,480 Speaker 3: it that the good central banks just had like smarter, 455 00:23:09,680 --> 00:23:13,720 Speaker 3: better economists, advising them better on policy than the other ones. 456 00:23:14,200 --> 00:23:16,600 Speaker 3: Or does it have more to do with the political 457 00:23:16,680 --> 00:23:21,320 Speaker 3: conditions that allow a central bank to operate separately from 458 00:23:22,000 --> 00:23:25,320 Speaker 3: to essentially operate with independent agency, And is that more 459 00:23:25,320 --> 00:23:27,440 Speaker 3: of a thing that originates in the political sphere of 460 00:23:27,440 --> 00:23:28,080 Speaker 3: those countries. 461 00:23:28,520 --> 00:23:31,359 Speaker 4: I think clearly the politics is very important. I guess 462 00:23:31,359 --> 00:23:34,639 Speaker 4: it would point to two things. One is those difficult 463 00:23:34,640 --> 00:23:38,640 Speaker 4: decades of the nineteen seventies and nineteen eighties which occurred 464 00:23:38,840 --> 00:23:42,439 Speaker 4: in many countries around the world, and where people in 465 00:23:42,480 --> 00:23:46,120 Speaker 4: these countries realized how much they hated inflation. We got 466 00:23:46,200 --> 00:23:48,280 Speaker 4: a little bit of a taste of this during the 467 00:23:48,320 --> 00:23:54,159 Speaker 4: COVID inflation. Inflation just is incredibly unpopular. And it was 468 00:23:54,240 --> 00:23:57,040 Speaker 4: for this reason that it was possible in the United 469 00:23:57,080 --> 00:24:00,000 Speaker 4: States to appoint Paul Wolker as chairman of the thing, 470 00:24:00,600 --> 00:24:03,480 Speaker 4: even though it was known before he was appointed what 471 00:24:03,600 --> 00:24:05,200 Speaker 4: he was going to do, that he was going to 472 00:24:05,240 --> 00:24:07,960 Speaker 4: raise interest rates aggressively, that this was going to be painful, 473 00:24:08,600 --> 00:24:10,639 Speaker 4: And so that's a remarkable thing that it was actually 474 00:24:10,720 --> 00:24:13,639 Speaker 4: possible to make this appointment. But of course similar things 475 00:24:13,720 --> 00:24:17,119 Speaker 4: actually happened in other countries as well. There were similar 476 00:24:17,119 --> 00:24:20,840 Speaker 4: appointments of aggressive, you know, central bankers that controlled inflation. 477 00:24:21,240 --> 00:24:23,600 Speaker 4: So I think part of this did come out of, 478 00:24:23,920 --> 00:24:27,199 Speaker 4: you know, sort of a public reaction to inflation. But 479 00:24:27,280 --> 00:24:29,639 Speaker 4: at the same time, it didn't happen everywhere, just like 480 00:24:29,680 --> 00:24:33,080 Speaker 4: you said, and could only have been in the context 481 00:24:33,160 --> 00:24:37,919 Speaker 4: of political protection for the central central bank independence and 482 00:24:38,119 --> 00:24:40,840 Speaker 4: perhaps in some ways it's just sort of a remarkable 483 00:24:40,880 --> 00:24:43,000 Speaker 4: thing that it ever did happen, that we've seen this 484 00:24:43,119 --> 00:24:45,480 Speaker 4: long period of low inflation in many of these countries. 485 00:24:45,760 --> 00:24:48,960 Speaker 3: I something realized I've heard over the years at various 486 00:24:48,960 --> 00:24:53,600 Speaker 3: times where we're deviations from the Taylor rule, whether it 487 00:24:53,640 --> 00:24:55,880 Speaker 3: was the zero lower boundar era or it couldn't lower them, 488 00:24:56,160 --> 00:24:58,680 Speaker 3: or more recently, how far were they off in the 489 00:24:58,720 --> 00:25:02,600 Speaker 3: seventies when inflation was going crazy? There is there a 490 00:25:02,640 --> 00:25:05,240 Speaker 3: good measure of like, no, clearly they should have been higher. 491 00:25:05,240 --> 00:25:06,800 Speaker 3: This like, what does the tailor rules say about that? 492 00:25:07,000 --> 00:25:09,840 Speaker 4: The nineteen seventies very interesting because one of the things 493 00:25:09,840 --> 00:25:14,240 Speaker 4: we point out in our paper is that the predictions 494 00:25:14,280 --> 00:25:16,600 Speaker 4: and the prescriptions of the Tailor rule are of course 495 00:25:16,600 --> 00:25:18,360 Speaker 4: only as good as the inputs you put into them. 496 00:25:18,720 --> 00:25:21,240 Speaker 4: And one of the things that some of the academic 497 00:25:21,240 --> 00:25:24,320 Speaker 4: literatures pointed out is that you don't necessarily want to 498 00:25:24,400 --> 00:25:26,879 Speaker 4: use the data that we have today on something like 499 00:25:26,920 --> 00:25:30,280 Speaker 4: the output gap, because views about the output gap, that is, 500 00:25:30,320 --> 00:25:33,160 Speaker 4: you know, how overheating is the economy have changed over time, 501 00:25:33,400 --> 00:25:36,199 Speaker 4: and in particular, in the nineteen seventies, the Federal Reserve 502 00:25:36,480 --> 00:25:40,760 Speaker 4: was pretty optimistic about the potential output of the US economy, 503 00:25:40,920 --> 00:25:44,960 Speaker 4: and for that reason, its judgment about the output gap 504 00:25:45,520 --> 00:25:48,320 Speaker 4: was pretty negative. And this helps to explain, through the 505 00:25:48,400 --> 00:25:51,320 Speaker 4: lens of the tailor rule, why they had pretty dubvish 506 00:25:51,560 --> 00:25:54,960 Speaker 4: monetary policy in the nineteen seventies. So actually, if you 507 00:25:55,080 --> 00:25:57,760 Speaker 4: take the real time data on what the FED said 508 00:25:57,800 --> 00:26:00,200 Speaker 4: it thought the output gap was at the time I'm 509 00:26:00,320 --> 00:26:04,639 Speaker 4: along with inflation, then you get more or less what 510 00:26:04,680 --> 00:26:07,520 Speaker 4: they did and what happened in terms of, you know, 511 00:26:07,560 --> 00:26:10,760 Speaker 4: why many people think that the policy was two douvison 512 00:26:10,760 --> 00:26:12,440 Speaker 4: in the nineteen seventies has a lot to do whether 513 00:26:12,480 --> 00:26:15,520 Speaker 4: you think those measures of the output gap were reasonable, 514 00:26:15,600 --> 00:26:17,960 Speaker 4: and you know, the current estimates according to the Fed, 515 00:26:18,040 --> 00:26:20,760 Speaker 4: you know, are much less sort of dubvish than they 516 00:26:20,760 --> 00:26:23,920 Speaker 4: were at the time. But it highlights the fact that 517 00:26:24,359 --> 00:26:26,600 Speaker 4: even when you want to create a rule which is 518 00:26:26,640 --> 00:26:29,760 Speaker 4: sort of very technocratic and doesn't give you any wiggle room. 519 00:26:30,359 --> 00:26:34,200 Speaker 4: That's not entirely true, because something like the output gap 520 00:26:34,600 --> 00:26:37,280 Speaker 4: is not something that you can just read off a 521 00:26:37,320 --> 00:26:42,600 Speaker 4: statistic like inflation. Actually you can, and so as a consequence, 522 00:26:42,840 --> 00:26:45,040 Speaker 4: you know, it really matters what judgment you take about 523 00:26:45,040 --> 00:26:46,879 Speaker 4: where you are relative to the economy's potential. 524 00:26:46,880 --> 00:26:50,680 Speaker 3: You can never escape human you never quite escape human judgment, unfortunately. 525 00:26:50,800 --> 00:26:53,120 Speaker 2: I remember that the output gap debate was a big 526 00:26:53,160 --> 00:26:55,919 Speaker 2: thing after two thousand and eight as well. Okay, just 527 00:26:55,960 --> 00:26:59,280 Speaker 2: going back to the idea of this technocratic rule, whether 528 00:26:59,320 --> 00:27:02,800 Speaker 2: it's scriptive or descriptive, I know people have different opinions 529 00:27:02,840 --> 00:27:05,720 Speaker 2: on that, but supposedly one of the benefits of it 530 00:27:05,800 --> 00:27:09,440 Speaker 2: being possibly prescriptive was that you have a central bank 531 00:27:09,440 --> 00:27:12,960 Speaker 2: that like does a very expected thing, like you know 532 00:27:13,000 --> 00:27:15,520 Speaker 2: what the reaction function is and you know what they're 533 00:27:15,520 --> 00:27:18,840 Speaker 2: going to do in response to inflation. How does that 534 00:27:18,960 --> 00:27:22,480 Speaker 2: play into the credibility aspect, because on the other hand, 535 00:27:22,560 --> 00:27:24,760 Speaker 2: you know, more credible central banks, they can kind of 536 00:27:24,760 --> 00:27:26,760 Speaker 2: go off and do their own thing, go beyond the 537 00:27:26,800 --> 00:27:29,199 Speaker 2: tailor rule, as you put it in the paper. But 538 00:27:29,440 --> 00:27:32,760 Speaker 2: on the other hand, does that unexpected behavior perhaps have 539 00:27:32,800 --> 00:27:35,440 Speaker 2: an impact on their own credibility, even if it's successful 540 00:27:35,480 --> 00:27:36,160 Speaker 2: in the short term. 541 00:27:36,240 --> 00:27:41,000 Speaker 4: Absolutely, I mean, I think that the technocratic rules, like 542 00:27:41,040 --> 00:27:43,600 Speaker 4: the tailor rule, they absolutely have a place in the 543 00:27:43,600 --> 00:27:46,800 Speaker 4: canon of monetary policy. And you know, perhaps one could 544 00:27:46,840 --> 00:27:49,200 Speaker 4: even argue that they should be the default in response 545 00:27:49,320 --> 00:27:53,600 Speaker 4: to many kinds of inflationary episodes, because there are many 546 00:27:53,680 --> 00:27:57,879 Speaker 4: kinds of inflationary episodes, like those associated with excessive demand, 547 00:27:57,960 --> 00:28:01,200 Speaker 4: you know, an overheating economy and all so even worse, 548 00:28:01,359 --> 00:28:04,560 Speaker 4: just sort of self fulfilling worries about inflation that spiral 549 00:28:04,640 --> 00:28:09,000 Speaker 4: off into really serious inflationary episodes. So in response to 550 00:28:09,040 --> 00:28:11,360 Speaker 4: all of those kinds of episodes, you know, it may 551 00:28:11,280 --> 00:28:13,399 Speaker 4: may be a very good idea for people to be 552 00:28:13,400 --> 00:28:15,359 Speaker 4: able to expect that central bank is going to respond 553 00:28:15,359 --> 00:28:18,160 Speaker 4: aggressively along the lines of something like the tailor rule. 554 00:28:18,600 --> 00:28:20,200 Speaker 4: And there's a sense in which you might want to 555 00:28:20,240 --> 00:28:23,679 Speaker 4: think about going beyond the tailor rule as something that 556 00:28:23,720 --> 00:28:26,160 Speaker 4: you don't do all the time, but that you recognize 557 00:28:26,160 --> 00:28:28,399 Speaker 4: has to happen some of the time when you have 558 00:28:28,440 --> 00:28:31,000 Speaker 4: a strong sense that a different kind of shock is 559 00:28:31,080 --> 00:28:34,000 Speaker 4: hitting the economy, and in some of those episodes, you 560 00:28:34,560 --> 00:28:37,919 Speaker 4: might actually want to very explicitly use forward guidance. So, 561 00:28:37,920 --> 00:28:40,640 Speaker 4: for example, during the Great Recession, that was a period 562 00:28:40,800 --> 00:28:43,560 Speaker 4: when there was you know, some of the most explicit 563 00:28:43,760 --> 00:28:47,080 Speaker 4: usage of forward guidance to talk about the timing of 564 00:28:47,200 --> 00:28:49,720 Speaker 4: how long the FED was going to keep interest rates 565 00:28:49,720 --> 00:28:52,880 Speaker 4: at zero, and that was a very powerful tool in 566 00:28:53,000 --> 00:28:56,400 Speaker 4: terms of affecting longer term interest rates. It's very easy 567 00:28:56,440 --> 00:28:58,800 Speaker 4: to see that in the data. And that's the kind 568 00:28:58,840 --> 00:29:02,200 Speaker 4: of thing where you know, it's not about going away 569 00:29:02,200 --> 00:29:06,040 Speaker 4: from reputation, which it's true. That core idea is that 570 00:29:06,080 --> 00:29:10,280 Speaker 4: you want markets to absolutely be confident that the central 571 00:29:10,280 --> 00:29:13,720 Speaker 4: bank is going to respond aggressively to any sense of 572 00:29:13,760 --> 00:29:17,080 Speaker 4: de anchoring of inflation expectations, and that is very important, 573 00:29:17,840 --> 00:29:22,120 Speaker 4: but at times you may want to use for guidance 574 00:29:22,160 --> 00:29:25,160 Speaker 4: in other ways, and the response of the fad to 575 00:29:25,760 --> 00:29:27,280 Speaker 4: the Great Recession as an example of that. 576 00:29:27,960 --> 00:29:30,640 Speaker 3: I just have one last question, and it's kind of selfish. 577 00:29:30,840 --> 00:29:32,960 Speaker 3: So you're talking about, you know, different sources of inflation, 578 00:29:33,000 --> 00:29:35,640 Speaker 3: whether it's access demand or whether it's supply. Tracy and 579 00:29:35,640 --> 00:29:39,160 Speaker 3: I did like a ton of podcast episodes in twenty 580 00:29:39,320 --> 00:29:43,000 Speaker 3: twenty one twenty twenty two about supply chains. We talked 581 00:29:43,000 --> 00:29:44,880 Speaker 3: about the ports and all this stuff that you know, 582 00:29:45,240 --> 00:29:48,080 Speaker 3: but someone could say, you guys were missing the forest 583 00:29:48,080 --> 00:29:50,840 Speaker 3: for the trees. Distress at the ports wasn't about supply 584 00:29:50,920 --> 00:29:53,520 Speaker 3: Chaine was because there was too much demand. Distress at 585 00:29:53,640 --> 00:29:56,680 Speaker 3: the X factory was it because of some supply chain 586 00:29:56,760 --> 00:29:58,520 Speaker 3: or missing part. There was just too much demand. You 587 00:29:58,560 --> 00:30:02,200 Speaker 3: guys were just disguised ueeing demand problems by focusing on 588 00:30:02,600 --> 00:30:05,680 Speaker 3: choke points that are inevitably going to emerge when booming demand. 589 00:30:06,320 --> 00:30:07,920 Speaker 3: I still think about this. I'm like, oh, should we 590 00:30:07,920 --> 00:30:09,520 Speaker 3: have focused on you know, I'm like, but you have 591 00:30:09,640 --> 00:30:11,680 Speaker 3: described a lot of this inflation, and part of the 592 00:30:11,720 --> 00:30:14,480 Speaker 3: reason for the Meca disinflation is because a lot of 593 00:30:14,520 --> 00:30:17,480 Speaker 3: it was supply defense. You know, I'm looking for a 594 00:30:17,520 --> 00:30:19,320 Speaker 3: defense of all this focus that we did on the 595 00:30:19,320 --> 00:30:20,000 Speaker 3: supply side. 596 00:30:20,040 --> 00:30:22,040 Speaker 4: So I think you're you're right that there's kind of 597 00:30:22,120 --> 00:30:26,720 Speaker 4: a false dichotomy between talking about demand shocks and things 598 00:30:26,920 --> 00:30:29,840 Speaker 4: like supply constraints, you know, like the ports and the 599 00:30:29,840 --> 00:30:32,320 Speaker 4: Suez Canal and so on, Because you're right that if 600 00:30:32,360 --> 00:30:35,120 Speaker 4: you have too much demand then at some point, you know, 601 00:30:35,200 --> 00:30:37,600 Speaker 4: these supply chains get clocked, and so it's it's it's 602 00:30:37,680 --> 00:30:40,880 Speaker 4: absolutely right that those kinds of supply constraints are not 603 00:30:40,960 --> 00:30:44,239 Speaker 4: quite the same as supply shocks, right, But there are 604 00:30:44,320 --> 00:30:46,959 Speaker 4: other things which are just directly shocked. 605 00:30:47,880 --> 00:30:49,720 Speaker 3: The war in Ukraine was a shocked. 606 00:30:49,480 --> 00:30:53,440 Speaker 4: Exactly, and COVID, for example, generated all sorts of sort 607 00:30:53,480 --> 00:30:57,280 Speaker 4: of negative productivity throughout the economy that just made things 608 00:30:57,360 --> 00:31:01,200 Speaker 4: more expensive to produce in a variety of ways. So 609 00:31:01,320 --> 00:31:03,000 Speaker 4: these are some of the things that I think are 610 00:31:03,200 --> 00:31:07,160 Speaker 4: genuinely basically negative productivity shocks, which were sort of hard 611 00:31:07,160 --> 00:31:10,560 Speaker 4: to find examples of previous to COVID, but easy to 612 00:31:10,600 --> 00:31:13,040 Speaker 4: find examples of during COVID. 613 00:31:13,280 --> 00:31:16,680 Speaker 2: How could are policy makers at identifying types of shocks 614 00:31:16,720 --> 00:31:17,400 Speaker 2: in real time? 615 00:31:17,640 --> 00:31:20,120 Speaker 4: That is a very important question. And you know, I 616 00:31:20,120 --> 00:31:23,920 Speaker 4: think my discussion of the nineteen seventies and the fact 617 00:31:24,040 --> 00:31:26,480 Speaker 4: that you know, views have changed over time about the 618 00:31:26,520 --> 00:31:29,880 Speaker 4: output gap during that period and also during the COVID inflation, 619 00:31:30,080 --> 00:31:32,600 Speaker 4: you know, views of change shows that this is by 620 00:31:32,600 --> 00:31:35,120 Speaker 4: no means perfect. But at the same time, I think 621 00:31:35,160 --> 00:31:37,960 Speaker 4: there are times when there's a strong sense that, you know, 622 00:31:38,040 --> 00:31:40,800 Speaker 4: the COVID inflation, for example, wasn't just about you know, 623 00:31:40,880 --> 00:31:44,080 Speaker 4: self fulfilling inflation expectations or something like this, And so 624 00:31:44,360 --> 00:31:46,360 Speaker 4: that's where I want to emphasize this idea that there's 625 00:31:46,760 --> 00:31:51,400 Speaker 4: a difference between saying that we can always identify the 626 00:31:51,440 --> 00:31:55,320 Speaker 4: shocks with confidence, which clearly we cannot, and saying that 627 00:31:55,440 --> 00:31:58,400 Speaker 4: we can never identify any shocks, you know, to the 628 00:31:58,440 --> 00:32:01,040 Speaker 4: extent that we need to tire ours all the time 629 00:32:01,480 --> 00:32:04,160 Speaker 4: to a mechanical rule, which you know, may deviate from 630 00:32:04,640 --> 00:32:07,120 Speaker 4: what theory really says is opt to a monetary policy. 631 00:32:07,480 --> 00:32:09,800 Speaker 4: But again, you know, I think crucial ideas is all 632 00:32:09,840 --> 00:32:12,400 Speaker 4: of this has to take place against the background where 633 00:32:12,440 --> 00:32:15,200 Speaker 4: there's sort of confidence in the central banks commitment to 634 00:32:15,720 --> 00:32:17,160 Speaker 4: longer run inflation stability. 635 00:32:17,640 --> 00:32:20,000 Speaker 2: All right, Emmy Nakhimura, thank you so much. This was 636 00:32:20,040 --> 00:32:21,480 Speaker 2: a real treat for us. I kind of want to 637 00:32:21,520 --> 00:32:22,520 Speaker 2: go to Berkeley now. 638 00:32:22,440 --> 00:32:24,000 Speaker 3: Yeah, I know it's a I did. 639 00:32:24,080 --> 00:32:24,160 Speaker 1: So. 640 00:32:24,280 --> 00:32:26,160 Speaker 3: That was amazing. Thank you so much. That was fantastic. 641 00:32:26,240 --> 00:32:41,120 Speaker 2: Thank you. That was great. Joe, that was fantastic. I 642 00:32:41,200 --> 00:32:44,760 Speaker 2: really enjoyed that conversation. And Emmy has a remarkable way 643 00:32:44,880 --> 00:32:49,520 Speaker 2: of explaining like some complicated concepts, yeah, very simply and 644 00:32:49,560 --> 00:32:52,040 Speaker 2: in a real understandable way, because if you flip through 645 00:32:52,040 --> 00:32:55,080 Speaker 2: her paper, there's a lot of formulas and things like that. 646 00:32:55,240 --> 00:32:57,480 Speaker 2: So it looks complicated, but she explained it very. 647 00:32:57,320 --> 00:33:00,760 Speaker 3: Clearly, incredibly clearly. I had the same thing. I was like, oh, man, 648 00:33:00,840 --> 00:33:02,240 Speaker 3: it would be so nice to just be like a 649 00:33:02,280 --> 00:33:05,840 Speaker 3: student and like alert, you know, get to a student. 650 00:33:05,880 --> 00:33:12,400 Speaker 3: Sounds very fun but incredibly clear. And you know, she's, 651 00:33:12,720 --> 00:33:16,680 Speaker 3: you know, one of the foremost inflation experts in sort 652 00:33:16,720 --> 00:33:18,959 Speaker 3: of academia. And so to hear her sort of like 653 00:33:19,400 --> 00:33:21,960 Speaker 3: sort of summation of how she thinks about the last 654 00:33:21,960 --> 00:33:24,200 Speaker 3: five years and the lessons learned from it was like 655 00:33:24,200 --> 00:33:25,160 Speaker 3: a real treat Yeah. 656 00:33:25,200 --> 00:33:28,520 Speaker 2: And obviously there are a couple of takeaways there. So one, 657 00:33:28,640 --> 00:33:31,880 Speaker 2: it is incredibly hard for policy or often incredibly hard 658 00:33:31,960 --> 00:33:35,800 Speaker 2: for policy makers to identify shocks, you know, at the 659 00:33:35,840 --> 00:33:38,840 Speaker 2: moment that they're happening, but sometimes they can, like in 660 00:33:38,920 --> 00:33:42,960 Speaker 2: COVID And I guess the second takeaway is the importance 661 00:33:43,000 --> 00:33:47,360 Speaker 2: of credibility. Yeah, right, And if you manage to successfully 662 00:33:48,000 --> 00:33:51,840 Speaker 2: control inflation for years and years and decades or whatever, 663 00:33:52,280 --> 00:33:55,440 Speaker 2: you build up that social capital which then allows you 664 00:33:55,640 --> 00:33:59,000 Speaker 2: to be somewhat more flexible when you have another crisis. 665 00:33:59,240 --> 00:34:02,040 Speaker 3: Yeah. I thought that was very interesting. Also, there are 666 00:34:02,040 --> 00:34:04,320 Speaker 3: a couple other things that's struck me. First of all, 667 00:34:04,400 --> 00:34:07,400 Speaker 3: until reading this paper. And this is just my fault 668 00:34:07,400 --> 00:34:09,440 Speaker 3: because I could look this up at any time. I 669 00:34:09,480 --> 00:34:13,399 Speaker 3: hadn't realized that the tailor rule was built up six 670 00:34:13,480 --> 00:34:17,000 Speaker 3: years of data. There's like, Okay, this is the rule 671 00:34:17,040 --> 00:34:18,960 Speaker 3: that describes when a central bank. 672 00:34:18,840 --> 00:34:20,360 Speaker 2: Is a monetary policy. 673 00:34:20,480 --> 00:34:22,920 Speaker 3: Basically, this is the rule that sort of describes what 674 00:34:22,960 --> 00:34:26,840 Speaker 3: a well functioning central bank looks like is basically six years. 675 00:34:27,840 --> 00:34:31,200 Speaker 3: You know. That's interesting. That's interesting to me too. And 676 00:34:31,320 --> 00:34:33,960 Speaker 3: second of all, this idea that even though it does 677 00:34:34,000 --> 00:34:37,200 Speaker 3: look like a hard rule, that you can't escape the 678 00:34:37,239 --> 00:34:40,200 Speaker 3: fact that you have to judge the output gap. And 679 00:34:40,239 --> 00:34:42,200 Speaker 3: there were very big debates about the size of the 680 00:34:42,200 --> 00:34:44,480 Speaker 3: output gap after two thousand and eight and two thousand 681 00:34:44,480 --> 00:34:47,400 Speaker 3: and nine, very sharp disagreements about the capacity or what 682 00:34:47,480 --> 00:34:50,160 Speaker 3: full employment looked like. So even that doesn't fully solve you. 683 00:34:50,200 --> 00:34:52,080 Speaker 3: Even if you do tie yourself to the lash of 684 00:34:52,120 --> 00:34:54,440 Speaker 3: a hard rule or lash yourself to the mast of 685 00:34:54,480 --> 00:34:57,320 Speaker 3: a hard rule, the tough problem. 686 00:34:56,960 --> 00:35:00,440 Speaker 2: Still yeah, it's it's tough, all right, leave it there, 687 00:35:00,480 --> 00:35:02,759 Speaker 2: Let's leave it there. This has been another episode of 688 00:35:02,800 --> 00:35:05,400 Speaker 2: the Odd Lots podcast. I'm Tracy Alloway. You can follow 689 00:35:05,440 --> 00:35:07,120 Speaker 2: me at Tracy Alloway. 690 00:35:06,920 --> 00:35:09,719 Speaker 3: And I'm Jill Wisenthal. You can follow me at the Stalwart. 691 00:35:09,880 --> 00:35:11,920 Speaker 3: If you want to read Emmy's paper, go check out 692 00:35:11,920 --> 00:35:15,680 Speaker 3: the Kansas City Fed's website. Follow our producers Kerman Rodriguez 693 00:35:15,680 --> 00:35:19,759 Speaker 3: at Kerman armand Dashel Bennett at Dashbot and Kilbrooks at Kilbrooks. 694 00:35:20,040 --> 00:35:22,720 Speaker 3: For more Oddlots content, go to Bloomberg dot com slash 695 00:35:22,760 --> 00:35:25,719 Speaker 3: odd Lots we're the daily newsletter and all of our episodes, 696 00:35:25,960 --> 00:35:27,920 Speaker 3: and you can chat about all of these topics twenty 697 00:35:27,920 --> 00:35:32,319 Speaker 3: four seven in our discord Discord dot gg slash out Lots. 698 00:35:32,320 --> 00:35:34,640 Speaker 2: And if you enjoy odd Lots, if you like it 699 00:35:34,680 --> 00:35:37,880 Speaker 2: when we go to Jackson Hole to interview prominent economists, 700 00:35:37,920 --> 00:35:40,440 Speaker 2: then please leave us a positive review on your favorite 701 00:35:40,440 --> 00:35:44,040 Speaker 2: podcast platform. And remember, if you are a Bloomberg subscriber, 702 00:35:44,080 --> 00:35:47,400 Speaker 2: you can listen to all of our episodes absolutely ad free. 703 00:35:47,600 --> 00:35:49,640 Speaker 2: All you need to do is find the Bloomberg channel 704 00:35:49,680 --> 00:35:53,040 Speaker 2: on Apple Podcasts and follow the instructions there. Thanks for 705 00:35:53,120 --> 00:36:10,279 Speaker 2: listening in