Time to read some literature on stabilization policies

As world economies and financial markets go under turbulence, time has come to read literature on stabilization policies.

In 2002 Kansas Fed in its annual symposium had a theme – Rethinking Stabilization Policy and all the papers are a must read. It will give some clues on where we are and how policies have fared or will help us restabilise. Above all, it will tell how certain policies are for certain purposes and whether it has served those purposes or not.

Here is some trivia with Kansas City Fed symposium. Every year Kansas Fed has a symposium around a main theme. Most economists reserve their best papers for the conference. For instance, the Raghuram Rajan paper that is often said to have predicted sub-prime markets (he highlighted huge incentives could  lead to more risk taking and financial turbulence) was presented in 2005 at this symposium.

In the same year symposium, Blinder and Reis presented a paper praising Greenspan and his policies which are criticised bigtime now. Then there is a famous paper presented by Romer couple in 2002 on stabilization which i see being referred now and then.

Interestingly, Bernanke also shifted his monetary policy stance in 2007 symposium. In 2007 Bernanke said:

It is not the responsibility of the Federal Reserve–nor would it be appropriate–to protect lenders and investors from the consequences of their financial decisions.  But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy.

We now know it is not true. The statement itself was problematic as developments in financial markets would imply that lenders and investors would be under stress. Now, we know you can always back on mon policy to bail you out.

2 Responses to “Time to read some literature on stabilization policies”

  1. Assorted Links « Mostly Economics Says:

    […] Somehow, papers/ideas presented in this conference are very very good (for instance see this post here). WSJ Blog points to the papers discussed here – By Raghu Rajan and Willem […]

  2. Blinder’s Dutch boy story retold « Mostly Economics Says:

    […] boy story retold Kansas Fed Symposium papers have been put on the website. The conference going by its tradition has led to couple of superb papers. The paper which has led to most controversy is the one by […]

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