Profiling Kenneth Rogoff’s work

Rogoff just got the biennial Deutsche Bank award for Financial Economics 2011.

Vítor Constâncio, Vice-President of ECB gives a nice opening speech covering the work and contribution of Rogoff. He highlights Rogoff’s work on:

  • Central bank independence
  • Exchange rate forecasting
  • International Macroeconomics
  • This time is different

Constancio does not agree to one of Rogoff’s suggestions of having higher inflation targets to deflate debt levels:

ECB continues to comply strictly to its mandate to ensure price stability and does not allow inflation to increase as a way of easing the burden of the debt. On this point we disagree with from some of the suggestions made recently by Professor Rogoff. The inflation tax is a blunt tool whose accidental effects would reflect mainly ex-ante institutional features (such as the degree of indexation or the maturity structure of liabilities) rather than the actual necessity to adjust. More importantly, Professor Rogoff has said himself, inflating the debt away would unduly jeopardise the most precious capital of the ECB and of any independent central bank, namely its credibility.

The ECB will never debase the currency, as our record shows: we have remarkably preserved both internal and external value of the euro by keeping inflation low and inflation expectations well-anchored. As we have learnt and repeatedly experienced, credibility and in particular the ability to anchor inflation expectations are crucial for the smooth functioning of monetary policy. Their key role has been highlighted again and again during the financial crisis,  particularly in preventing the danger of an entrenchment of deflationary expectations.

This is on expected lines.  We are continuously floating between theoretical solutions and practical implementation…

Addendum:

Previous winners were:

  • 2005 – Eugene Fama
  • 2007 – Michael Woodford
  • 2009 –  Robert Shiller
  • 2011 – Ken Rogoff

 

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