Edward Conard

Top Ten New York Times Bestselling Author

  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

AI Summary. The authors estimate that the effects of monetary policy vary with the underlying level of inflation: when US inflation is below 5.5%, monetary policy has no meaningful effects on labor markets, while at inflation between 5.5% and 11% its effects on unemployment are sizable and longer-lasting.

Valeria Gargiulo, Christian Matthes, and Katerina Petrova Federal Reserve Bank of New York
Date Posted:

.@cmatthes_econ reviews data from 1970-2007 and finds when inflation is running < 5.5% per year, monetary policy has a short-lived impact on prices but no impact on labor markets, “consistent with the recent “soft landing” of the U.S. economy.”

Does the impact of monetary policy depend on the inflation level?

Core argument: When U.S. inflation is below 5.5% — the case for most of the post-WWII sample — the authors' model identifies no meaningful effects of monetary policy on labor markets, a result they say is consistent with the U.S. economy's recent "soft landing.".

We find that the effects of monetary policy vary substantially with the underlying level of inflation in the economy. For most of our post-WWII sample, inflation has been less than 5.5% in the U.S., which our model identifies as a period during which monetary policy has no meaningful effects on labor markets. Even though our sample ends in 2007 due to the availability of the instrument series used to identify the effects of monetary policy, our results are consistent with the recent “soft landing” of the U.S. economy. On the other hand, when inflation is between 5.5 and 11%, the effects of monetary policy are larger and longer-lasting, since variables are much more persistent in this regime, and the effects of monetary policy on unemployment are sizable and significant.

Takeaways by Macro Roundup® AI

  1. When U.S. inflation is below 5.5% — the case for most of the post-WWII sample — the authors' model identifies no meaningful effects of monetary policy on labor markets, a result they say is consistent with the U.S. economy's recent "soft landing.".
  2. When inflation runs between 5.5% and 11%, the authors find the effects of monetary policy larger and longer-lasting because variables are much more persistent in that regime, with sizable and significant effects on unemployment.
  3. The authors' sample ends in 2007 because of the availability of the instrument series used to identify the effects of monetary policy.

Related Articles:

  • In Search of Safe Havens: The Trust Deficit and Risk-free Investments! — Plotting US Treasury bond rates against a crude fundamental risk-free rate—actual inflation plus real GDP growth—undercuts the argument that central banks set interest rates. Central banks can nudge rates at the margin but cannot override the fundamentals of inflation and real growth.
  • The Fed and the Secular Decline in Interest Rates — The authors find that the long-run decline in US Treasury yields since 1980 is fully accounted for by movements in a narrow window around Federal Reserve policy meetings, while yield changes outside that window prove transitory. They suggest the Federal Reserve conveys information to markets about the long-run level of interest rates.
  • Fiscal Influences on Inflation in OECD Countries, 2020-2022 — Across 21 economies, the authors find that headline and core inflation responded positively to a measure of government spending increases scaled by pre-pandemic debt-to-GDP and average debt duration. Estimated coefficients of 0.4–0.5 suggest 40–50% of the extra spending was financed through inflation, with the rest through conventional public finance.
Showing 113 database articles primarily about Inflation