Seminar in Applied Economics: Nobel Laureate Paul Krugman
This event has passed.
Tuesday, March 8, 2022
Open to the Public
Spring 2022 Seminar in Applied Economics organized by Professor Yochanan Shachmurove will feature Nobel Laureate Paul Krugman.
Krugman will be presenting, "Credible Irresponsibility Revisited"
Please feel free to register and attend the event using the zoom link below:
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To preview, I don’t think the answer is one-dimensional. To some extent we are dealing with the dead hand of conventional wisdom, with 2% fetters replacing the golden fetters of the 1930s. But there are also some real arguments for keeping the inflation target low if you can still achieve full employment, and both the budgetary and the economic implications of a low “natural” real interest rate make it easier to justify permanent fiscal stimulus than I would have imagined back in 1998. 2 The first section of this paper reiterates my 1998 argument for credible irresponsibility and talks about the practical difficulties of implementing that strategy. The second section talks about the strange history of two percent — how a seemingly arbitrary inflation number acquired such iconic status that it’s seemingly immovable, even though the quantitative logic that originally seemed to justify it hasn’t stood the test of time. The third section is about the downsides of revising the inflation target up. The fourth section is about the new economics of public debt — why serious economists, Blanchard in particular, are no longer scared by historically high debt-to-GDP ratios and why crowding-out arguments have lost most of their force. A final section asks to what extent revisiting these issues makes a case for a fiscal as opposed to monetary response to the low-rate problem.