Jackson Hole: Not Just a Nice Place to Vacation

For the last 30 years, the Kansas City Fed has hosted a symposium for national and international central bankers in Jackson Hole, Wyoming. In general, these symposia are usually academic in nature and not terribly newsworthy. However, unlike 1985’s rather staid symposium topic, The Challenge for American Agriculture, this year’s Financial Stability and Macroeconomic Policy really highlighted the Fed’s role and the role of other central banks during this crisis.

I bet if symposia were rated by audience participation, this one might top the list. Maybe the Fed should twitter the next one. On a more serious note, some of the papers presented were really interesting and worth highlighting. The first paper presented, “The ‘Surprising’ Origin and Nature of Financial Crises” by Roberto Caballero of MIT, was well done in that it warns the academic and practitioner community that we should not just assume that the origins of the crisis were all the usual suspects (leverage, poor underwriting standards, lax regulation, etc.) as that would automatically thwart any new thinking in terms of solutions. The author offers some ‘surprising’ causes and some proposed solutions. Check it out here.

The second paper I wanted to highlight was “Utilizing Monetary Policy to Stabilize Economic Activity.” The author Carl Walsh of University of California- Santa Cruz argues that it is “inconsistent” for the Fed to advocate for an extended period of low rates while also aiming to have stable inflation. During the discussion section of the presentation, Governor Kohn addressed the author’s views. Check out the paper and some news coverage of the Kohn’s response.

All the papers presented at the conference can be found HERE.

What do you think about the “linkages” argument in the first paper? And in the second paper, do you think Walsh has a point — is this a case of the Fed trying to have its cake and eat it too — or just a matter of timing?