On the contribution of monetary policy to economic fluctuations

Today we are fortunate to have a guest contribution written by Joseph E. Gagnon of the Peterson Institute of International Economics. On June 20, 2012, the Federal Reserve System’s Federal Open Market Committee extinguished the last shred of doubt as to whether it intends to achieve its mandated objectives. Despite a substantial markdown of an already inadequate forecast, the Fed did not take any actions that would make it possible to achieve either of its objectives over the foreseeable future.

Today, we are fortunate to have a guest contribution written by Olivier Coibion (UT Austin), Yuriy Gorodnichenko (UC Berkeley), Lorenz Kueng (Northwestern) and John Silvia (Wells Fargo); it is based on IMF Working Paper No. 199

Today, we are fortunate to have a guest contribution written by Olivier Coibion (UT Austin), Yuriy Gorodnichenko (UC Berkeley), and Gee Hee Hong (Bank of Canada); it is based on The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications.

By Joseph E. Gagnon Today, we're fortunate to have Joe Gagnon, senior fellow at the Peterson Institute for International Economics, as a guest contributor.

Olivier Blanchard: Rethinking Macroeconomic Policy: Rethinking and reforms are both taking place.  But we still do not know the final destination, be it for the redefinition of monetary policy, or the contours of financial regulation, or the role of macroprudential tools. We have a general sense of direction, but we are largely navigating by sight. I shall take six examples….

Here I offer some observations on what's been holding back the recovery. Two of the most important sectors in U.S. business cycle fluctuations are autos and housing. For example, in the 2007:Q4-2009:Q2 recession, real GDP fell on average at a 2.7% annual rate, with autos and housing accounting for about half of this decline all by themselves.

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.This post is a guest contribution by Manoj Pradhan and Spyros Andreopoulos of Morgan Stanley.

Today we are fortunate to have a guest contribution written by Yuriy Gorodnichenko (UC Berkeley) and Michael Weber (UC Berkeley). It is based upon their paper entitled "Are Sticky Prices Costly? Evidence From The Stock Market". We argue that the inflexibility of firms in adjusting prices after nominal shocks is associated with real costs.