speeches · May 26, 2008

Regional President Speech

James Bullard · President

Backrooms Monetarypolicy Stability Robustnessandfit Model Uncertainty Roundtable Discussion JamesBullard PresidentandCEO FederalReserveBankofSt. Louis 27May2008 ModelUncertaintyandMonetaryPolicyDesign BankofKorea Viewsexpressedarethoseoftheauthoranddonotnecessarily reflecttheviewsoftheFederalReserveSystem. JamesBullard—FederalReserveBankofSt.Louis “Macroeconomicsisnormaltimespunctuatedby (cid:15) adjustmenttoshocks.” “Macroeconomicsisadjustmenttoshockspunctuatedby (cid:15) normaltimes.” Atthestart(1998): (cid:15) Attheend(2008): (cid:15) Lesson: Adjustmentiseverything. (cid:15) Macroeconomymaybevulnerableto“bigticketlosses” (cid:15) duringadjustment. Backrooms Monetarypolicy Stability Robustnessandfit The nature of macroeconomics WilliamPoole: (cid:15) JamesBullard—FederalReserveBankofSt.Louis “Macroeconomicsisadjustmenttoshockspunctuatedby (cid:15) normaltimes.” “Macroeconomicsisnormaltimespunctuatedby (cid:15) adjustmenttoshocks.” Attheend(2008): (cid:15) Lesson: Adjustmentiseverything. (cid:15) Macroeconomymaybevulnerableto“bigticketlosses” (cid:15) duringadjustment. Backrooms Monetarypolicy Stability Robustnessandfit The nature of macroeconomics WilliamPoole: (cid:15) Atthestart(1998): (cid:15) JamesBullard—FederalReserveBankofSt.Louis “Macroeconomicsisadjustmenttoshockspunctuatedby (cid:15) normaltimes.” Attheend(2008): (cid:15) Lesson: Adjustmentiseverything. (cid:15) Macroeconomymaybevulnerableto“bigticketlosses” (cid:15) duringadjustment. Backrooms Monetarypolicy Stability Robustnessandfit The nature of macroeconomics WilliamPoole: (cid:15) Atthestart(1998): (cid:15) “Macroeconomicsisnormaltimespunctuatedby (cid:15) adjustmenttoshocks.” JamesBullard—FederalReserveBankofSt.Louis “Macroeconomicsisadjustmenttoshockspunctuatedby (cid:15) normaltimes.” Lesson: Adjustmentiseverything. (cid:15) Macroeconomymaybevulnerableto“bigticketlosses” (cid:15) duringadjustment. Backrooms Monetarypolicy Stability Robustnessandfit The nature of macroeconomics WilliamPoole: (cid:15) Atthestart(1998): (cid:15) “Macroeconomicsisnormaltimespunctuatedby (cid:15) adjustmenttoshocks.” Attheend(2008): (cid:15) JamesBullard—FederalReserveBankofSt.Louis Lesson: Adjustmentiseverything. (cid:15) Macroeconomymaybevulnerableto“bigticketlosses” (cid:15) duringadjustment. Backrooms Monetarypolicy Stability Robustnessandfit The nature of macroeconomics WilliamPoole: (cid:15) Atthestart(1998): (cid:15) “Macroeconomicsisnormaltimespunctuatedby (cid:15) adjustmenttoshocks.” Attheend(2008): (cid:15) “Macroeconomicsisadjustmenttoshockspunctuatedby (cid:15) normaltimes.” JamesBullard—FederalReserveBankofSt.Louis Macroeconomymaybevulnerableto“bigticketlosses” (cid:15) duringadjustment. Backrooms Monetarypolicy Stability Robustnessandfit The nature of macroeconomics WilliamPoole: (cid:15) Atthestart(1998): (cid:15) “Macroeconomicsisnormaltimespunctuatedby (cid:15) adjustmenttoshocks.” Attheend(2008): (cid:15) “Macroeconomicsisadjustmenttoshockspunctuatedby (cid:15) normaltimes.” Lesson: Adjustmentiseverything. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Backrooms Monetarypolicy Stability Robustnessandfit The nature of macroeconomics WilliamPoole: (cid:15) Atthestart(1998): (cid:15) “Macroeconomicsisnormaltimespunctuatedby (cid:15) adjustmenttoshocks.” Attheend(2008): (cid:15) “Macroeconomicsisadjustmenttoshockspunctuatedby (cid:15) normaltimes.” Lesson: Adjustmentiseverything. (cid:15) Macroeconomymaybevulnerableto“bigticketlosses” (cid:15) duringadjustment. JamesBullard—FederalReserveBankofSt.Louis Inparticular: Sincethemodelsareaboutpeople,areour (cid:15) doubtsalsotheirdoubts? Muchismissinginanyanalysis. (cid:15) Weunderstandthis. (cid:15) Instudyingsimplermodels,weencounterlotsof (cid:15) complications. Weinferthatlargemodelsmusthavealotofunanalyzed (cid:15) complications. Result: Wedonottrustlargemodels. (cid:15) Result: Weareuncertainaboutthecorrectmodelofthe (cid:15) macroeconomy. Howcanwecopewiththesedoubts? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Sources of model uncertainty Wecannotwritethe“full”macroeconomicmodeldown (cid:15) andstudyit. JamesBullard—FederalReserveBankofSt.Louis Inparticular: Sincethemodelsareaboutpeople,areour (cid:15) doubtsalsotheirdoubts? Weunderstandthis. (cid:15) Instudyingsimplermodels,weencounterlotsof (cid:15) complications. Weinferthatlargemodelsmusthavealotofunanalyzed (cid:15) complications. Result: Wedonottrustlargemodels. (cid:15) Result: Weareuncertainaboutthecorrectmodelofthe (cid:15) macroeconomy. Howcanwecopewiththesedoubts? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Sources of model uncertainty Wecannotwritethe“full”macroeconomicmodeldown (cid:15) andstudyit. Muchismissinginanyanalysis. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Inparticular: Sincethemodelsareaboutpeople,areour (cid:15) doubtsalsotheirdoubts? Instudyingsimplermodels,weencounterlotsof (cid:15) complications. Weinferthatlargemodelsmusthavealotofunanalyzed (cid:15) complications. Result: Wedonottrustlargemodels. (cid:15) Result: Weareuncertainaboutthecorrectmodelofthe (cid:15) macroeconomy. Howcanwecopewiththesedoubts? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Sources of model uncertainty Wecannotwritethe“full”macroeconomicmodeldown (cid:15) andstudyit. Muchismissinginanyanalysis. (cid:15) Weunderstandthis. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Inparticular: Sincethemodelsareaboutpeople,areour (cid:15) doubtsalsotheirdoubts? Weinferthatlargemodelsmusthavealotofunanalyzed (cid:15) complications. Result: Wedonottrustlargemodels. (cid:15) Result: Weareuncertainaboutthecorrectmodelofthe (cid:15) macroeconomy. Howcanwecopewiththesedoubts? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Sources of model uncertainty Wecannotwritethe“full”macroeconomicmodeldown (cid:15) andstudyit. Muchismissinginanyanalysis. (cid:15) Weunderstandthis. (cid:15) Instudyingsimplermodels,weencounterlotsof (cid:15) complications. JamesBullard—FederalReserveBankofSt.Louis Inparticular: Sincethemodelsareaboutpeople,areour (cid:15) doubtsalsotheirdoubts? Result: Wedonottrustlargemodels. (cid:15) Result: Weareuncertainaboutthecorrectmodelofthe (cid:15) macroeconomy. Howcanwecopewiththesedoubts? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Sources of model uncertainty Wecannotwritethe“full”macroeconomicmodeldown (cid:15) andstudyit. Muchismissinginanyanalysis. (cid:15) Weunderstandthis. (cid:15) Instudyingsimplermodels,weencounterlotsof (cid:15) complications. Weinferthatlargemodelsmusthavealotofunanalyzed (cid:15) complications. JamesBullard—FederalReserveBankofSt.Louis Inparticular: Sincethemodelsareaboutpeople,areour (cid:15) doubtsalsotheirdoubts? Result: Weareuncertainaboutthecorrectmodelofthe (cid:15) macroeconomy. Howcanwecopewiththesedoubts? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Sources of model uncertainty Wecannotwritethe“full”macroeconomicmodeldown (cid:15) andstudyit. Muchismissinginanyanalysis. (cid:15) Weunderstandthis. (cid:15) Instudyingsimplermodels,weencounterlotsof (cid:15) complications. Weinferthatlargemodelsmusthavealotofunanalyzed (cid:15) complications. Result: Wedonottrustlargemodels. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Inparticular: Sincethemodelsareaboutpeople,areour (cid:15) doubtsalsotheirdoubts? Howcanwecopewiththesedoubts? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Sources of model uncertainty Wecannotwritethe“full”macroeconomicmodeldown (cid:15) andstudyit. Muchismissinginanyanalysis. (cid:15) Weunderstandthis. (cid:15) Instudyingsimplermodels,weencounterlotsof (cid:15) complications. Weinferthatlargemodelsmusthavealotofunanalyzed (cid:15) complications. Result: Wedonottrustlargemodels. (cid:15) Result: Weareuncertainaboutthecorrectmodelofthe (cid:15) macroeconomy. JamesBullard—FederalReserveBankofSt.Louis Inparticular: Sincethemodelsareaboutpeople,areour (cid:15) doubtsalsotheirdoubts? Backrooms Monetarypolicy Stability Robustnessandfit Sources of model uncertainty Wecannotwritethe“full”macroeconomicmodeldown (cid:15) andstudyit. Muchismissinginanyanalysis. (cid:15) Weunderstandthis. (cid:15) Instudyingsimplermodels,weencounterlotsof (cid:15) complications. Weinferthatlargemodelsmusthavealotofunanalyzed (cid:15) complications. Result: Wedonottrustlargemodels. (cid:15) Result: Weareuncertainaboutthecorrectmodelofthe (cid:15) macroeconomy. Howcanwecopewiththesedoubts? (cid:15) JamesBullard—FederalReserveBankofSt.Louis Backrooms Monetarypolicy Stability Robustnessandfit Sources of model uncertainty Wecannotwritethe“full”macroeconomicmodeldown (cid:15) andstudyit. Muchismissinginanyanalysis. (cid:15) Weunderstandthis. (cid:15) Instudyingsimplermodels,weencounterlotsof (cid:15) complications. Weinferthatlargemodelsmusthavealotofunanalyzed (cid:15) complications. Result: Wedonottrustlargemodels. (cid:15) Result: Weareuncertainaboutthecorrectmodelofthe (cid:15) macroeconomy. Howcanwecopewiththesedoubts? (cid:15) Inparticular: Sincethemodelsareaboutpeople,areour (cid:15) doubtsalsotheirdoubts? JamesBullard—FederalReserveBankofSt.Louis Backroom: Statesandparametersareknownbyall,and (cid:15) policyismenacinglycomplicated. Frontroom: Statesandparametersareknownbynone,but (cid:15) policyitselfiseasy. Backroom: Stationarityassumptionscommonplace,but (cid:15) dataareoftenuntrusted. Frontroom: Stationarityconsideredunlikely,butthirstfor (cid:15) dataisunquenchable. Caricatureofthebackroomversusthefrontroom: (cid:15) Implication: Thefocusinthepolicyworldison (cid:15) determiningthestateofthesystembylookingatlotsof data. Backrooms Monetarypolicy Stability Robustnessandfit Backrooms and frontrooms Sargent’samusingdescriptionofacademia(backroom)vs (cid:15) policymakers(frontroom). JamesBullard—FederalReserveBankofSt.Louis Backroom: Statesandparametersareknownbyall,and (cid:15) policyismenacinglycomplicated. Frontroom: Statesandparametersareknownbynone,but (cid:15) policyitselfiseasy. Backroom: Stationarityassumptionscommonplace,but (cid:15) dataareoftenuntrusted. Frontroom: Stationarityconsideredunlikely,butthirstfor (cid:15) dataisunquenchable. Implication: Thefocusinthepolicyworldison (cid:15) determiningthestateofthesystembylookingatlotsof data. Backrooms Monetarypolicy Stability Robustnessandfit Backrooms and frontrooms Sargent’samusingdescriptionofacademia(backroom)vs (cid:15) policymakers(frontroom). Caricatureofthebackroomversusthefrontroom: (cid:15) JamesBullard—FederalReserveBankofSt.Louis Frontroom: Statesandparametersareknownbynone,but (cid:15) policyitselfiseasy. Backroom: Stationarityassumptionscommonplace,but (cid:15) dataareoftenuntrusted. Frontroom: Stationarityconsideredunlikely,butthirstfor (cid:15) dataisunquenchable. Implication: Thefocusinthepolicyworldison (cid:15) determiningthestateofthesystembylookingatlotsof data. Backrooms Monetarypolicy Stability Robustnessandfit Backrooms and frontrooms Sargent’samusingdescriptionofacademia(backroom)vs (cid:15) policymakers(frontroom). Caricatureofthebackroomversusthefrontroom: (cid:15) Backroom: Statesandparametersareknownbyall,and (cid:15) policyismenacinglycomplicated. JamesBullard—FederalReserveBankofSt.Louis Backroom: Stationarityassumptionscommonplace,but (cid:15) dataareoftenuntrusted. Frontroom: Stationarityconsideredunlikely,butthirstfor (cid:15) dataisunquenchable. Implication: Thefocusinthepolicyworldison (cid:15) determiningthestateofthesystembylookingatlotsof data. Backrooms Monetarypolicy Stability Robustnessandfit Backrooms and frontrooms Sargent’samusingdescriptionofacademia(backroom)vs (cid:15) policymakers(frontroom). Caricatureofthebackroomversusthefrontroom: (cid:15) Backroom: Statesandparametersareknownbyall,and (cid:15) policyismenacinglycomplicated. Frontroom: Statesandparametersareknownbynone,but (cid:15) policyitselfiseasy. JamesBullard—FederalReserveBankofSt.Louis Frontroom: Stationarityconsideredunlikely,butthirstfor (cid:15) dataisunquenchable. Implication: Thefocusinthepolicyworldison (cid:15) determiningthestateofthesystembylookingatlotsof data. Backrooms Monetarypolicy Stability Robustnessandfit Backrooms and frontrooms Sargent’samusingdescriptionofacademia(backroom)vs (cid:15) policymakers(frontroom). Caricatureofthebackroomversusthefrontroom: (cid:15) Backroom: Statesandparametersareknownbyall,and (cid:15) policyismenacinglycomplicated. Frontroom: Statesandparametersareknownbynone,but (cid:15) policyitselfiseasy. Backroom: Stationarityassumptionscommonplace,but (cid:15) dataareoftenuntrusted. JamesBullard—FederalReserveBankofSt.Louis Implication: Thefocusinthepolicyworldison (cid:15) determiningthestateofthesystembylookingatlotsof data. Backrooms Monetarypolicy Stability Robustnessandfit Backrooms and frontrooms Sargent’samusingdescriptionofacademia(backroom)vs (cid:15) policymakers(frontroom). Caricatureofthebackroomversusthefrontroom: (cid:15) Backroom: Statesandparametersareknownbyall,and (cid:15) policyismenacinglycomplicated. Frontroom: Statesandparametersareknownbynone,but (cid:15) policyitselfiseasy. Backroom: Stationarityassumptionscommonplace,but (cid:15) dataareoftenuntrusted. Frontroom: Stationarityconsideredunlikely,butthirstfor (cid:15) dataisunquenchable. JamesBullard—FederalReserveBankofSt.Louis Backrooms Monetarypolicy Stability Robustnessandfit Backrooms and frontrooms Sargent’samusingdescriptionofacademia(backroom)vs (cid:15) policymakers(frontroom). Caricatureofthebackroomversusthefrontroom: (cid:15) Backroom: Statesandparametersareknownbyall,and (cid:15) policyismenacinglycomplicated. Frontroom: Statesandparametersareknownbynone,but (cid:15) policyitselfiseasy. Backroom: Stationarityassumptionscommonplace,but (cid:15) dataareoftenuntrusted. Frontroom: Stationarityconsideredunlikely,butthirstfor (cid:15) dataisunquenchable. Implication: Thefocusinthepolicyworldison (cid:15) determiningthestateofthesystembylookingatlotsof data. JamesBullard—FederalReserveBankofSt.Louis FOMChaswrestledwiththisissueforalongtime. (cid:15) Alsoduetotitleslike"MakingMacroModelsBehave (cid:15) Reasonably"? Importanttostressthatforecastsaremade"under (cid:15) appropriatepolicy." Staffforecastssometimesmadeunder"constantinterest (cid:15) rate"projections,thoughttobea"nopolicychange” benchmark. Sargentcorrecttostressspecificationdoubts,drivenby (cid:15) largemodeldistrustdescribedabove. ItwouldbetheRomer’spureforecastexerciseifwetake (cid:15) thePrescottview. Backrooms Monetarypolicy Stability Robustnessandfit Sargent meets the Romers AforecastingexercisecomparingFOMCtostaffforecasts. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Alsoduetotitleslike"MakingMacroModelsBehave (cid:15) Reasonably"? FOMChaswrestledwiththisissueforalongtime. (cid:15) Staffforecastssometimesmadeunder"constantinterest (cid:15) rate"projections,thoughttobea"nopolicychange” benchmark. Sargentcorrecttostressspecificationdoubts,drivenby (cid:15) largemodeldistrustdescribedabove. ItwouldbetheRomer’spureforecastexerciseifwetake (cid:15) thePrescottview. Backrooms Monetarypolicy Stability Robustnessandfit Sargent meets the Romers AforecastingexercisecomparingFOMCtostaffforecasts. (cid:15) Importanttostressthatforecastsaremade"under (cid:15) appropriatepolicy." JamesBullard—FederalReserveBankofSt.Louis Alsoduetotitleslike"MakingMacroModelsBehave (cid:15) Reasonably"? Staffforecastssometimesmadeunder"constantinterest (cid:15) rate"projections,thoughttobea"nopolicychange” benchmark. Sargentcorrecttostressspecificationdoubts,drivenby (cid:15) largemodeldistrustdescribedabove. ItwouldbetheRomer’spureforecastexerciseifwetake (cid:15) thePrescottview. Backrooms Monetarypolicy Stability Robustnessandfit Sargent meets the Romers AforecastingexercisecomparingFOMCtostaffforecasts. (cid:15) Importanttostressthatforecastsaremade"under (cid:15) appropriatepolicy." FOMChaswrestledwiththisissueforalongtime. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Alsoduetotitleslike"MakingMacroModelsBehave (cid:15) Reasonably"? Sargentcorrecttostressspecificationdoubts,drivenby (cid:15) largemodeldistrustdescribedabove. ItwouldbetheRomer’spureforecastexerciseifwetake (cid:15) thePrescottview. Backrooms Monetarypolicy Stability Robustnessandfit Sargent meets the Romers AforecastingexercisecomparingFOMCtostaffforecasts. (cid:15) Importanttostressthatforecastsaremade"under (cid:15) appropriatepolicy." FOMChaswrestledwiththisissueforalongtime. (cid:15) Staffforecastssometimesmadeunder"constantinterest (cid:15) rate"projections,thoughttobea"nopolicychange” benchmark. JamesBullard—FederalReserveBankofSt.Louis Alsoduetotitleslike"MakingMacroModelsBehave (cid:15) Reasonably"? ItwouldbetheRomer’spureforecastexerciseifwetake (cid:15) thePrescottview. Backrooms Monetarypolicy Stability Robustnessandfit Sargent meets the Romers AforecastingexercisecomparingFOMCtostaffforecasts. (cid:15) Importanttostressthatforecastsaremade"under (cid:15) appropriatepolicy." FOMChaswrestledwiththisissueforalongtime. (cid:15) Staffforecastssometimesmadeunder"constantinterest (cid:15) rate"projections,thoughttobea"nopolicychange” benchmark. Sargentcorrecttostressspecificationdoubts,drivenby (cid:15) largemodeldistrustdescribedabove. JamesBullard—FederalReserveBankofSt.Louis ItwouldbetheRomer’spureforecastexerciseifwetake (cid:15) thePrescottview. Backrooms Monetarypolicy Stability Robustnessandfit Sargent meets the Romers AforecastingexercisecomparingFOMCtostaffforecasts. (cid:15) Importanttostressthatforecastsaremade"under (cid:15) appropriatepolicy." FOMChaswrestledwiththisissueforalongtime. (cid:15) Staffforecastssometimesmadeunder"constantinterest (cid:15) rate"projections,thoughttobea"nopolicychange” benchmark. Sargentcorrecttostressspecificationdoubts,drivenby (cid:15) largemodeldistrustdescribedabove. Alsoduetotitleslike"MakingMacroModelsBehave (cid:15) Reasonably"? JamesBullard—FederalReserveBankofSt.Louis Backrooms Monetarypolicy Stability Robustnessandfit Sargent meets the Romers AforecastingexercisecomparingFOMCtostaffforecasts. (cid:15) Importanttostressthatforecastsaremade"under (cid:15) appropriatepolicy." FOMChaswrestledwiththisissueforalongtime. (cid:15) Staffforecastssometimesmadeunder"constantinterest (cid:15) rate"projections,thoughttobea"nopolicychange” benchmark. Sargentcorrecttostressspecificationdoubts,drivenby (cid:15) largemodeldistrustdescribedabove. Alsoduetotitleslike"MakingMacroModelsBehave (cid:15) Reasonably"? ItwouldbetheRomer’spureforecastexerciseifwetake (cid:15) thePrescottview. JamesBullard—FederalReserveBankofSt.Louis Perhapsbecauseofakeypieceofdata. (cid:15) Orbecauseofanofficialstatement. (cid:15) Theentirepathchanges. (cid:15) RelatedtoBeaudryandPortierconcerningthetimingof (cid:15) informationandchangesinbeliefs. Thesestrikemeasbigideas. (cid:15) ThosethatfollowmonetarypolicyintheU.S.understand (cid:15) whenanoldexpectedinterestratepathisdiscardedand replacedwithanewexpectedinterestratepath. RelatedworkbyHamilton. (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Information flows EricLeeper: informationflowassumptionsandrealities (cid:15) affectinterpretationsofempiricalworkontheeffectsof fiscalpolicychanges. JamesBullard—FederalReserveBankofSt.Louis Perhapsbecauseofakeypieceofdata. (cid:15) Orbecauseofanofficialstatement. (cid:15) Theentirepathchanges. (cid:15) Thesestrikemeasbigideas. (cid:15) ThosethatfollowmonetarypolicyintheU.S.understand (cid:15) whenanoldexpectedinterestratepathisdiscardedand replacedwithanewexpectedinterestratepath. RelatedworkbyHamilton. (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Information flows EricLeeper: informationflowassumptionsandrealities (cid:15) affectinterpretationsofempiricalworkontheeffectsof fiscalpolicychanges. RelatedtoBeaudryandPortierconcerningthetimingof (cid:15) informationandchangesinbeliefs. JamesBullard—FederalReserveBankofSt.Louis Perhapsbecauseofakeypieceofdata. (cid:15) Orbecauseofanofficialstatement. (cid:15) Theentirepathchanges. (cid:15) ThosethatfollowmonetarypolicyintheU.S.understand (cid:15) whenanoldexpectedinterestratepathisdiscardedand replacedwithanewexpectedinterestratepath. RelatedworkbyHamilton. (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Information flows EricLeeper: informationflowassumptionsandrealities (cid:15) affectinterpretationsofempiricalworkontheeffectsof fiscalpolicychanges. RelatedtoBeaudryandPortierconcerningthetimingof (cid:15) informationandchangesinbeliefs. Thesestrikemeasbigideas. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Perhapsbecauseofakeypieceofdata. (cid:15) Orbecauseofanofficialstatement. (cid:15) Theentirepathchanges. (cid:15) RelatedworkbyHamilton. (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Information flows EricLeeper: informationflowassumptionsandrealities (cid:15) affectinterpretationsofempiricalworkontheeffectsof fiscalpolicychanges. RelatedtoBeaudryandPortierconcerningthetimingof (cid:15) informationandchangesinbeliefs. Thesestrikemeasbigideas. (cid:15) ThosethatfollowmonetarypolicyintheU.S.understand (cid:15) whenanoldexpectedinterestratepathisdiscardedand replacedwithanewexpectedinterestratepath. JamesBullard—FederalReserveBankofSt.Louis Orbecauseofanofficialstatement. (cid:15) Theentirepathchanges. (cid:15) RelatedworkbyHamilton. (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Information flows EricLeeper: informationflowassumptionsandrealities (cid:15) affectinterpretationsofempiricalworkontheeffectsof fiscalpolicychanges. RelatedtoBeaudryandPortierconcerningthetimingof (cid:15) informationandchangesinbeliefs. Thesestrikemeasbigideas. (cid:15) ThosethatfollowmonetarypolicyintheU.S.understand (cid:15) whenanoldexpectedinterestratepathisdiscardedand replacedwithanewexpectedinterestratepath. Perhapsbecauseofakeypieceofdata. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Theentirepathchanges. (cid:15) RelatedworkbyHamilton. (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Information flows EricLeeper: informationflowassumptionsandrealities (cid:15) affectinterpretationsofempiricalworkontheeffectsof fiscalpolicychanges. RelatedtoBeaudryandPortierconcerningthetimingof (cid:15) informationandchangesinbeliefs. Thesestrikemeasbigideas. (cid:15) ThosethatfollowmonetarypolicyintheU.S.understand (cid:15) whenanoldexpectedinterestratepathisdiscardedand replacedwithanewexpectedinterestratepath. Perhapsbecauseofakeypieceofdata. (cid:15) Orbecauseofanofficialstatement. (cid:15) JamesBullard—FederalReserveBankofSt.Louis RelatedworkbyHamilton. (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Information flows EricLeeper: informationflowassumptionsandrealities (cid:15) affectinterpretationsofempiricalworkontheeffectsof fiscalpolicychanges. RelatedtoBeaudryandPortierconcerningthetimingof (cid:15) informationandchangesinbeliefs. Thesestrikemeasbigideas. (cid:15) ThosethatfollowmonetarypolicyintheU.S.understand (cid:15) whenanoldexpectedinterestratepathisdiscardedand replacedwithanewexpectedinterestratepath. Perhapsbecauseofakeypieceofdata. (cid:15) Orbecauseofanofficialstatement. (cid:15) Theentirepathchanges. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Backrooms Monetarypolicy Stability Robustnessandfit Information flows EricLeeper: informationflowassumptionsandrealities (cid:15) affectinterpretationsofempiricalworkontheeffectsof fiscalpolicychanges. RelatedtoBeaudryandPortierconcerningthetimingof (cid:15) informationandchangesinbeliefs. Thesestrikemeasbigideas. (cid:15) ThosethatfollowmonetarypolicyintheU.S.understand (cid:15) whenanoldexpectedinterestratepathisdiscardedand replacedwithanewexpectedinterestratepath. Perhapsbecauseofakeypieceofdata. (cid:15) Orbecauseofanofficialstatement. (cid:15) Theentirepathchanges. (cid:15) RelatedworkbyHamilton. (cid:15) JamesBullard—FederalReserveBankofSt.Louis ... thethreatmightbebestdescribedasthepossibilityofa (cid:15) transitiontoasteadystatewithalowleveloffinancial intermediationservices. Stabilityismoreimportantthanyouthinkasapolicygoal. (cid:15) Policymakersshouldstrivefirsttoavoidthebigticket (cid:15) lossesassociatedwithindeterminacyandexpectational instability. Intherecentfinancialcrisis... (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit More stability analysis IwouldprefertoseemorestabilityanalysisthanIdidat (cid:15) thisconference. JamesBullard—FederalReserveBankofSt.Louis ... thethreatmightbebestdescribedasthepossibilityofa (cid:15) transitiontoasteadystatewithalowleveloffinancial intermediationservices. Policymakersshouldstrivefirsttoavoidthebigticket (cid:15) lossesassociatedwithindeterminacyandexpectational instability. Intherecentfinancialcrisis... (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit More stability analysis IwouldprefertoseemorestabilityanalysisthanIdidat (cid:15) thisconference. Stabilityismoreimportantthanyouthinkasapolicygoal. (cid:15) JamesBullard—FederalReserveBankofSt.Louis ... thethreatmightbebestdescribedasthepossibilityofa (cid:15) transitiontoasteadystatewithalowleveloffinancial intermediationservices. Intherecentfinancialcrisis... (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit More stability analysis IwouldprefertoseemorestabilityanalysisthanIdidat (cid:15) thisconference. Stabilityismoreimportantthanyouthinkasapolicygoal. (cid:15) Policymakersshouldstrivefirsttoavoidthebigticket (cid:15) lossesassociatedwithindeterminacyandexpectational instability. JamesBullard—FederalReserveBankofSt.Louis ... thethreatmightbebestdescribedasthepossibilityofa (cid:15) transitiontoasteadystatewithalowleveloffinancial intermediationservices. Backrooms Monetarypolicy Stability Robustnessandfit More stability analysis IwouldprefertoseemorestabilityanalysisthanIdidat (cid:15) thisconference. Stabilityismoreimportantthanyouthinkasapolicygoal. (cid:15) Policymakersshouldstrivefirsttoavoidthebigticket (cid:15) lossesassociatedwithindeterminacyandexpectational instability. Intherecentfinancialcrisis... (cid:15) JamesBullard—FederalReserveBankofSt.Louis Backrooms Monetarypolicy Stability Robustnessandfit More stability analysis IwouldprefertoseemorestabilityanalysisthanIdidat (cid:15) thisconference. Stabilityismoreimportantthanyouthinkasapolicygoal. (cid:15) Policymakersshouldstrivefirsttoavoidthebigticket (cid:15) lossesassociatedwithindeterminacyandexpectational instability. Intherecentfinancialcrisis... (cid:15) ... thethreatmightbebestdescribedasthepossibilityofa (cid:15) transitiontoasteadystatewithalowleveloffinancial intermediationservices. JamesBullard—FederalReserveBankofSt.Louis SeeBullardandSuda(2008). (cid:15) Standardanalysisgoesthrough,butwithanadditional (cid:15) termintheactuallawofmotion. E-stabilityconditionsareunchanged. (cid:15) CarefulreadersofWoodford’spaperatthisconference (cid:15) wouldseeexpectationalstabilityinplaythereaswell. NewBayesianinterpretationsexistofthestandard (cid:15) recursivelearningexercise. Idea: SupposetheforecastingcommunityisBayesian (cid:15) insteadofclassical. EvenBayesianlearningimpliessometypeofexpectational (cid:15) stabilitycondition. Backrooms Monetarypolicy Stability Robustnessandfit Learning “Recursiveleastsquares”justoneinafamilyofrecursive (cid:15) algorithms. JamesBullard—FederalReserveBankofSt.Louis Standardanalysisgoesthrough,butwithanadditional (cid:15) termintheactuallawofmotion. E-stabilityconditionsareunchanged. (cid:15) CarefulreadersofWoodford’spaperatthisconference (cid:15) wouldseeexpectationalstabilityinplaythereaswell. SeeBullardandSuda(2008). (cid:15) Idea: SupposetheforecastingcommunityisBayesian (cid:15) insteadofclassical. EvenBayesianlearningimpliessometypeofexpectational (cid:15) stabilitycondition. Backrooms Monetarypolicy Stability Robustnessandfit Learning “Recursiveleastsquares”justoneinafamilyofrecursive (cid:15) algorithms. NewBayesianinterpretationsexistofthestandard (cid:15) recursivelearningexercise. JamesBullard—FederalReserveBankofSt.Louis Standardanalysisgoesthrough,butwithanadditional (cid:15) termintheactuallawofmotion. E-stabilityconditionsareunchanged. (cid:15) CarefulreadersofWoodford’spaperatthisconference (cid:15) wouldseeexpectationalstabilityinplaythereaswell. Idea: SupposetheforecastingcommunityisBayesian (cid:15) insteadofclassical. EvenBayesianlearningimpliessometypeofexpectational (cid:15) stabilitycondition. Backrooms Monetarypolicy Stability Robustnessandfit Learning “Recursiveleastsquares”justoneinafamilyofrecursive (cid:15) algorithms. NewBayesianinterpretationsexistofthestandard (cid:15) recursivelearningexercise. SeeBullardandSuda(2008). (cid:15) JamesBullard—FederalReserveBankofSt.Louis CarefulreadersofWoodford’spaperatthisconference (cid:15) wouldseeexpectationalstabilityinplaythereaswell. Standardanalysisgoesthrough,butwithanadditional (cid:15) termintheactuallawofmotion. E-stabilityconditionsareunchanged. (cid:15) EvenBayesianlearningimpliessometypeofexpectational (cid:15) stabilitycondition. Backrooms Monetarypolicy Stability Robustnessandfit Learning “Recursiveleastsquares”justoneinafamilyofrecursive (cid:15) algorithms. NewBayesianinterpretationsexistofthestandard (cid:15) recursivelearningexercise. SeeBullardandSuda(2008). (cid:15) Idea: SupposetheforecastingcommunityisBayesian (cid:15) insteadofclassical. JamesBullard—FederalReserveBankofSt.Louis CarefulreadersofWoodford’spaperatthisconference (cid:15) wouldseeexpectationalstabilityinplaythereaswell. E-stabilityconditionsareunchanged. (cid:15) EvenBayesianlearningimpliessometypeofexpectational (cid:15) stabilitycondition. Backrooms Monetarypolicy Stability Robustnessandfit Learning “Recursiveleastsquares”justoneinafamilyofrecursive (cid:15) algorithms. NewBayesianinterpretationsexistofthestandard (cid:15) recursivelearningexercise. SeeBullardandSuda(2008). (cid:15) Idea: SupposetheforecastingcommunityisBayesian (cid:15) insteadofclassical. Standardanalysisgoesthrough,butwithanadditional (cid:15) termintheactuallawofmotion. JamesBullard—FederalReserveBankofSt.Louis CarefulreadersofWoodford’spaperatthisconference (cid:15) wouldseeexpectationalstabilityinplaythereaswell. EvenBayesianlearningimpliessometypeofexpectational (cid:15) stabilitycondition. Backrooms Monetarypolicy Stability Robustnessandfit Learning “Recursiveleastsquares”justoneinafamilyofrecursive (cid:15) algorithms. NewBayesianinterpretationsexistofthestandard (cid:15) recursivelearningexercise. SeeBullardandSuda(2008). (cid:15) Idea: SupposetheforecastingcommunityisBayesian (cid:15) insteadofclassical. Standardanalysisgoesthrough,butwithanadditional (cid:15) termintheactuallawofmotion. E-stabilityconditionsareunchanged. (cid:15) JamesBullard—FederalReserveBankofSt.Louis CarefulreadersofWoodford’spaperatthisconference (cid:15) wouldseeexpectationalstabilityinplaythereaswell. Backrooms Monetarypolicy Stability Robustnessandfit Learning “Recursiveleastsquares”justoneinafamilyofrecursive (cid:15) algorithms. NewBayesianinterpretationsexistofthestandard (cid:15) recursivelearningexercise. SeeBullardandSuda(2008). (cid:15) Idea: SupposetheforecastingcommunityisBayesian (cid:15) insteadofclassical. Standardanalysisgoesthrough,butwithanadditional (cid:15) termintheactuallawofmotion. E-stabilityconditionsareunchanged. (cid:15) EvenBayesianlearningimpliessometypeofexpectational (cid:15) stabilitycondition. JamesBullard—FederalReserveBankofSt.Louis Backrooms Monetarypolicy Stability Robustnessandfit Learning “Recursiveleastsquares”justoneinafamilyofrecursive (cid:15) algorithms. NewBayesianinterpretationsexistofthestandard (cid:15) recursivelearningexercise. SeeBullardandSuda(2008). (cid:15) Idea: SupposetheforecastingcommunityisBayesian (cid:15) insteadofclassical. Standardanalysisgoesthrough,butwithanadditional (cid:15) termintheactuallawofmotion. E-stabilityconditionsareunchanged. (cid:15) EvenBayesianlearningimpliessometypeofexpectational (cid:15) stabilitycondition. CarefulreadersofWoodford’spaperatthisconference (cid:15) wouldseeexpectationalstabilityinplaythereaswell. JamesBullard—FederalReserveBankofSt.Louis Mehra-Prescott. (cid:15) TwistedbeliefsofCecchetti,Lam,andMarkarebroughton (cid:15) bytheGreatDepression. AgentsareBayesianlearnerswithrespecttothe (cid:15) probabilitiesofstates. Badstateisrarelyvisited,sothatpessimismremains (cid:15) influentialfordecades. Theequitypremiumislargeanddeclinesonlyveryslowly (cid:15) tothe“true”valueofzero. ButconsiderCogleyandSargent(2007)concerningthe (cid:15) equitypremium. The1970sasasimilarbeliefs-twistingevent? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Learning and robustness Athoughtaboutrobustness: Agentscould“learnnottobe (cid:15) sopessimistic.” JamesBullard—FederalReserveBankofSt.Louis Mehra-Prescott. (cid:15) TwistedbeliefsofCecchetti,Lam,andMarkarebroughton (cid:15) bytheGreatDepression. AgentsareBayesianlearnerswithrespecttothe (cid:15) probabilitiesofstates. Badstateisrarelyvisited,sothatpessimismremains (cid:15) influentialfordecades. Theequitypremiumislargeanddeclinesonlyveryslowly (cid:15) tothe“true”valueofzero. The1970sasasimilarbeliefs-twistingevent? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Learning and robustness Athoughtaboutrobustness: Agentscould“learnnottobe (cid:15) sopessimistic.” ButconsiderCogleyandSargent(2007)concerningthe (cid:15) equitypremium. JamesBullard—FederalReserveBankofSt.Louis TwistedbeliefsofCecchetti,Lam,andMarkarebroughton (cid:15) bytheGreatDepression. AgentsareBayesianlearnerswithrespecttothe (cid:15) probabilitiesofstates. Badstateisrarelyvisited,sothatpessimismremains (cid:15) influentialfordecades. Theequitypremiumislargeanddeclinesonlyveryslowly (cid:15) tothe“true”valueofzero. The1970sasasimilarbeliefs-twistingevent? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Learning and robustness Athoughtaboutrobustness: Agentscould“learnnottobe (cid:15) sopessimistic.” ButconsiderCogleyandSargent(2007)concerningthe (cid:15) equitypremium. Mehra-Prescott. (cid:15) JamesBullard—FederalReserveBankofSt.Louis AgentsareBayesianlearnerswithrespecttothe (cid:15) probabilitiesofstates. Badstateisrarelyvisited,sothatpessimismremains (cid:15) influentialfordecades. Theequitypremiumislargeanddeclinesonlyveryslowly (cid:15) tothe“true”valueofzero. The1970sasasimilarbeliefs-twistingevent? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Learning and robustness Athoughtaboutrobustness: Agentscould“learnnottobe (cid:15) sopessimistic.” ButconsiderCogleyandSargent(2007)concerningthe (cid:15) equitypremium. Mehra-Prescott. (cid:15) TwistedbeliefsofCecchetti,Lam,andMarkarebroughton (cid:15) bytheGreatDepression. JamesBullard—FederalReserveBankofSt.Louis Badstateisrarelyvisited,sothatpessimismremains (cid:15) influentialfordecades. Theequitypremiumislargeanddeclinesonlyveryslowly (cid:15) tothe“true”valueofzero. The1970sasasimilarbeliefs-twistingevent? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Learning and robustness Athoughtaboutrobustness: Agentscould“learnnottobe (cid:15) sopessimistic.” ButconsiderCogleyandSargent(2007)concerningthe (cid:15) equitypremium. Mehra-Prescott. (cid:15) TwistedbeliefsofCecchetti,Lam,andMarkarebroughton (cid:15) bytheGreatDepression. AgentsareBayesianlearnerswithrespecttothe (cid:15) probabilitiesofstates. JamesBullard—FederalReserveBankofSt.Louis Theequitypremiumislargeanddeclinesonlyveryslowly (cid:15) tothe“true”valueofzero. The1970sasasimilarbeliefs-twistingevent? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Learning and robustness Athoughtaboutrobustness: Agentscould“learnnottobe (cid:15) sopessimistic.” ButconsiderCogleyandSargent(2007)concerningthe (cid:15) equitypremium. Mehra-Prescott. (cid:15) TwistedbeliefsofCecchetti,Lam,andMarkarebroughton (cid:15) bytheGreatDepression. AgentsareBayesianlearnerswithrespecttothe (cid:15) probabilitiesofstates. Badstateisrarelyvisited,sothatpessimismremains (cid:15) influentialfordecades. JamesBullard—FederalReserveBankofSt.Louis The1970sasasimilarbeliefs-twistingevent? (cid:15) Backrooms Monetarypolicy Stability Robustnessandfit Learning and robustness Athoughtaboutrobustness: Agentscould“learnnottobe (cid:15) sopessimistic.” ButconsiderCogleyandSargent(2007)concerningthe (cid:15) equitypremium. Mehra-Prescott. (cid:15) TwistedbeliefsofCecchetti,Lam,andMarkarebroughton (cid:15) bytheGreatDepression. AgentsareBayesianlearnerswithrespecttothe (cid:15) probabilitiesofstates. Badstateisrarelyvisited,sothatpessimismremains (cid:15) influentialfordecades. Theequitypremiumislargeanddeclinesonlyveryslowly (cid:15) tothe“true”valueofzero. JamesBullard—FederalReserveBankofSt.Louis Backrooms Monetarypolicy Stability Robustnessandfit Learning and robustness Athoughtaboutrobustness: Agentscould“learnnottobe (cid:15) sopessimistic.” ButconsiderCogleyandSargent(2007)concerningthe (cid:15) equitypremium. Mehra-Prescott. (cid:15) TwistedbeliefsofCecchetti,Lam,andMarkarebroughton (cid:15) bytheGreatDepression. AgentsareBayesianlearnerswithrespecttothe (cid:15) probabilitiesofstates. Badstateisrarelyvisited,sothatpessimismremains (cid:15) influentialfordecades. Theequitypremiumislargeanddeclinesonlyveryslowly (cid:15) tothe“true”valueofzero. The1970sasasimilarbeliefs-twistingevent? (cid:15) JamesBullard—FederalReserveBankofSt.Louis Kocherlakota(2007,FRB-St. LouisReview). (cid:15) Arguesbyexamplethatabetter-fittingmodelcangivea (cid:15) worseanswertoasubstantivepolicyquestion. Whatwewantistheanswertothepolicyquestion. (cid:15) Thefittodatagivesusconfidencethatweareontheright (cid:15) trackwithoureconomicconcepts. Butwedonotwanttopushsohardingettingagoodfit (cid:15) thatweloseoureconomicgroundingaltogether. Goodmodelfitisoftentakenasabsolutelyessentialinthe (cid:15) “frontroom.”Butnotnecessarilyinthebackroom: IseetherecentliteraturedescribedbySimsasanattempt (cid:15) toreachanintelligentcompromiseinthisarea. Backrooms Monetarypolicy Stability Robustnessandfit Fitting the data ProfessorSimsspokeeloquentlyaboutmodelfitversusthe (cid:15) interpretabilityofDSGEmodels. JamesBullard—FederalReserveBankofSt.Louis Thefittodatagivesusconfidencethatweareontheright (cid:15) trackwithoureconomicconcepts. Butwedonotwanttopushsohardingettingagoodfit (cid:15) thatweloseoureconomicgroundingaltogether. Kocherlakota(2007,FRB-St. LouisReview). (cid:15) Arguesbyexamplethatabetter-fittingmodelcangivea (cid:15) worseanswertoasubstantivepolicyquestion. Whatwewantistheanswertothepolicyquestion. (cid:15) IseetherecentliteraturedescribedbySimsasanattempt (cid:15) toreachanintelligentcompromiseinthisarea. Backrooms Monetarypolicy Stability Robustnessandfit Fitting the data ProfessorSimsspokeeloquentlyaboutmodelfitversusthe (cid:15) interpretabilityofDSGEmodels. Goodmodelfitisoftentakenasabsolutelyessentialinthe (cid:15) “frontroom.”Butnotnecessarilyinthebackroom: JamesBullard—FederalReserveBankofSt.Louis Thefittodatagivesusconfidencethatweareontheright (cid:15) trackwithoureconomicconcepts. Butwedonotwanttopushsohardingettingagoodfit (cid:15) thatweloseoureconomicgroundingaltogether. Arguesbyexamplethatabetter-fittingmodelcangivea (cid:15) worseanswertoasubstantivepolicyquestion. Whatwewantistheanswertothepolicyquestion. (cid:15) IseetherecentliteraturedescribedbySimsasanattempt (cid:15) toreachanintelligentcompromiseinthisarea. Backrooms Monetarypolicy Stability Robustnessandfit Fitting the data ProfessorSimsspokeeloquentlyaboutmodelfitversusthe (cid:15) interpretabilityofDSGEmodels. Goodmodelfitisoftentakenasabsolutelyessentialinthe (cid:15) “frontroom.”Butnotnecessarilyinthebackroom: Kocherlakota(2007,FRB-St. LouisReview). (cid:15) JamesBullard—FederalReserveBankofSt.Louis Thefittodatagivesusconfidencethatweareontheright (cid:15) trackwithoureconomicconcepts. Butwedonotwanttopushsohardingettingagoodfit (cid:15) thatweloseoureconomicgroundingaltogether. Whatwewantistheanswertothepolicyquestion. (cid:15) IseetherecentliteraturedescribedbySimsasanattempt (cid:15) toreachanintelligentcompromiseinthisarea. Backrooms Monetarypolicy Stability Robustnessandfit Fitting the data ProfessorSimsspokeeloquentlyaboutmodelfitversusthe (cid:15) interpretabilityofDSGEmodels. Goodmodelfitisoftentakenasabsolutelyessentialinthe (cid:15) “frontroom.”Butnotnecessarilyinthebackroom: Kocherlakota(2007,FRB-St. LouisReview). (cid:15) Arguesbyexamplethatabetter-fittingmodelcangivea (cid:15) worseanswertoasubstantivepolicyquestion. JamesBullard—FederalReserveBankofSt.Louis Thefittodatagivesusconfidencethatweareontheright (cid:15) trackwithoureconomicconcepts. Butwedonotwanttopushsohardingettingagoodfit (cid:15) thatweloseoureconomicgroundingaltogether. IseetherecentliteraturedescribedbySimsasanattempt (cid:15) toreachanintelligentcompromiseinthisarea. Backrooms Monetarypolicy Stability Robustnessandfit Fitting the data ProfessorSimsspokeeloquentlyaboutmodelfitversusthe (cid:15) interpretabilityofDSGEmodels. Goodmodelfitisoftentakenasabsolutelyessentialinthe (cid:15) “frontroom.”Butnotnecessarilyinthebackroom: Kocherlakota(2007,FRB-St. LouisReview). (cid:15) Arguesbyexamplethatabetter-fittingmodelcangivea (cid:15) worseanswertoasubstantivepolicyquestion. Whatwewantistheanswertothepolicyquestion. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Thefittodatagivesusconfidencethatweareontheright (cid:15) trackwithoureconomicconcepts. Butwedonotwanttopushsohardingettingagoodfit (cid:15) thatweloseoureconomicgroundingaltogether. Backrooms Monetarypolicy Stability Robustnessandfit Fitting the data ProfessorSimsspokeeloquentlyaboutmodelfitversusthe (cid:15) interpretabilityofDSGEmodels. Goodmodelfitisoftentakenasabsolutelyessentialinthe (cid:15) “frontroom.”Butnotnecessarilyinthebackroom: Kocherlakota(2007,FRB-St. LouisReview). (cid:15) Arguesbyexamplethatabetter-fittingmodelcangivea (cid:15) worseanswertoasubstantivepolicyquestion. Whatwewantistheanswertothepolicyquestion. (cid:15) IseetherecentliteraturedescribedbySimsasanattempt (cid:15) toreachanintelligentcompromiseinthisarea. JamesBullard—FederalReserveBankofSt.Louis Butwedonotwanttopushsohardingettingagoodfit (cid:15) thatweloseoureconomicgroundingaltogether. Backrooms Monetarypolicy Stability Robustnessandfit Fitting the data ProfessorSimsspokeeloquentlyaboutmodelfitversusthe (cid:15) interpretabilityofDSGEmodels. Goodmodelfitisoftentakenasabsolutelyessentialinthe (cid:15) “frontroom.”Butnotnecessarilyinthebackroom: Kocherlakota(2007,FRB-St. LouisReview). (cid:15) Arguesbyexamplethatabetter-fittingmodelcangivea (cid:15) worseanswertoasubstantivepolicyquestion. Whatwewantistheanswertothepolicyquestion. (cid:15) IseetherecentliteraturedescribedbySimsasanattempt (cid:15) toreachanintelligentcompromiseinthisarea. Thefittodatagivesusconfidencethatweareontheright (cid:15) trackwithoureconomicconcepts. JamesBullard—FederalReserveBankofSt.Louis Backrooms Monetarypolicy Stability Robustnessandfit Fitting the data ProfessorSimsspokeeloquentlyaboutmodelfitversusthe (cid:15) interpretabilityofDSGEmodels. Goodmodelfitisoftentakenasabsolutelyessentialinthe (cid:15) “frontroom.”Butnotnecessarilyinthebackroom: Kocherlakota(2007,FRB-St. LouisReview). (cid:15) Arguesbyexamplethatabetter-fittingmodelcangivea (cid:15) worseanswertoasubstantivepolicyquestion. Whatwewantistheanswertothepolicyquestion. (cid:15) IseetherecentliteraturedescribedbySimsasanattempt (cid:15) toreachanintelligentcompromiseinthisarea. Thefittodatagivesusconfidencethatweareontheright (cid:15) trackwithoureconomicconcepts. Butwedonotwanttopushsohardingettingagoodfit (cid:15) thatweloseoureconomicgroundingaltogether. JamesBullard—FederalReserveBankofSt.Louis Thishasbeenanexcellentconferenceoncriticaltopicsat (cid:15) theresearchfrontierofmacroeconomics. Backrooms Monetarypolicy Stability Robustnessandfit An excellent conference ThankstoGovernorLeeandtheBankofKoreastaff. (cid:15) JamesBullard—FederalReserveBankofSt.Louis Backrooms Monetarypolicy Stability Robustnessandfit An excellent conference ThankstoGovernorLeeandtheBankofKoreastaff. (cid:15) Thishasbeenanexcellentconferenceoncriticaltopicsat (cid:15) theresearchfrontierofmacroeconomics. JamesBullard—FederalReserveBankofSt.Louis

Cite this document

APA

James Bullard (2008, May 26). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_20080527_james_bullard

BibTeX

@misc{wtfs_regional_speeche_20080527_james_bullard,
  author = {James Bullard},
  title = {Regional President Speech},
  year = {2008},
  month = {May},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_20080527_james_bullard},
  note = {Retrieved via When the Fed Speaks corpus}
}