No, I don’t think “team transitory” won the inflation debate in 2021. I posted about it yesterday. I am getting pushback from people I follow and respect, e.g. @paulkrugman, @Claudia_Sahm, @mtkonczal. Reading it, I should clarify what I mean. 1/ I understand Musk-land is not a place for nuanced argument. But! 1) I did NOT say that the increase in Fed Funds rates explains the fall in inflation. 2) I did NOT say easing of supply constraints has nothing to do with the fall in inflation. 2/

No. "Team temporary/transitory" did not win the inflation debate. At the end of summer 2021 I was a card carrying member of team temporary. I thought that the burst in inflation was due to temporary factors. Hence, the Fed did not need to tighten aggressively. /1 By fall 2021 it was clear to me and many others that inflation was broad based and not just due to stuff like used car prices blowing up. When facts change, I change my mind. What do you do? 2/

@ben_moll is right to take a little victory lap in a new paper with @MSchularick and @GeorgZachmann. This is based on his his work with @BachmannRudi, @DBaqaee, @christianbaye13, @kuhnmo, @andreasloeschel, @APeichl, #KarenPittel, @MSchularick. Let me explain 1/

https://twitter.com/ben_moll/status/1655837631756877824

This was timely public spirited policy research at its best. It had a big impact. I know, for I follow the polical dynamics in oil and gas well for reasons not relevant for this post. And I don't know how well you recall the environment their paper was written in. 2/

Happy to see Krugman is not holding it against us that we shamelessly stole the title of his 98 classic, which is one of my all time favorites and started me off on my research agenda on the ZLB. But I want draw your attention to his is second point in his thread. 1/

https://twitter.com/paulkrugman/status/1654837267330891776

While our model predicts a soft landing, Krugman worries whether Fed's "motor control is good enough to do this without precipitating an unnecessary recession". 2/

I guess I am not off to a particularly stellar start in the prediction business in my last tweet predicting a "soft landing" with a 70 percent chance and a "hard landing" with a 30 percent chance. But ... I forgot to define what I meant by hard or soft! 1/ Does a mild recession, for example, qualify as a soft landing? Obviously no recession at all is the softest of landings. But, honestly, I have never gotten my self particularly excited over the technical definitions of a "recession". 2/

I'm entering the forecasting business based on my recent paper with @PierpaBenigno: 70 percent "soft landing," i.e. mild recession to bring down inflation, 30 percent hard landing. Let me explain 1/ nber.org/papers/w31197#… First off, as an economist, I've lately started to put a lot greater value in making forecasts. The reason: I was spectacularly wrong September 2021. My prediction about inflation? Not a big deal. Nothing to see here! 2/

I just released a paper with @PierpaBenigno.
The inflation surge is due to a nonlinear Phillips curve. And we find ourselves at that non-linear part for the first time since late 1960. 1/ nber.org/papers/w31197#… We provide some empirical evidence from this and propose a new model, which has the implication, among other things, that once you’re at the "vertical part" of the Phillips curve it is "easy up". 2/

For a good while now, I have been greatly annoyed by my tweed at the very beginning of the great inflation debate. The high inflation read yesterday reminded me of my mistake. The tweed minimized the role of the Biden stimulus in contributing to inflation. /1 Making that suggestion, however, was not the problem. The problem was that my logic was sloppy. I should have know better, for example, had I remembered my own paper with Neil Mehrotra, Sanjay Singh and Larry Summers. 2/

I have, like many others, been a bit surprised by how quickly inflation took off. It just occured to me that perhaps I should have read my own papers more carefully(!) 1/ The Aggregate Supply relationship (in red) below is from my paper with Mehrotra and Robbins on secular stagnation (linked at the end). It is sort of like an "inverted L". At employment below full employment you have a well behaved static Phillips curve 2/

Bernanke famously quipped that “The problem with Quantitative Easing (QE) is that it works in practice but not in theory”.
My paper with Bhattarai and Gafarov on how QE can work in theory is forthcoming in the Review of Economic Studies. A thread: First, on QE not working in theory: I think Bernanke had in mind QE2 and QE3, where Fed bought long term government bonds with money (bank reserves). Why QE1 worked in both in theory and practice is easier to see since it was aimed at market dysfunction.

Longish thread:
I forgot the now mandatory promotional tweet of our recently published JME paper, "Kaldor and Piketty’s Facts: The Rise of Monopoly Power in the United States" joint with two of my former students Jake Robbins @thesugar and Ella Getz Wold @GetzWold. 1/x The story: There’s been quite a bit of applied micro research showing evidence of a rise in the monopoly power of firms. Of course there is also, as always with important questions, substantial controversy about the magnitude of this result as we document in the paper. 2/x

I am inept on twitter. I can’t figure out how to respond to my good friends Jon’s thread with multiple tweeds. Check out his thread below for context. Issue: How much should the Fed tighten next meeting? Jon says 50 basis points. I asked about if he had done model simulations. 1/

https://twitter.com/JonSteinsson/status/1499520977830432772

So Jon responded that he was skeptical of the value of models for assessing these type of questions. Since I agree with Jon on almost anything (we have known each other from high school in Iceland!) I figure it would be fun to flesh out why I disagree with him. 2/

I have just completed this paper with my grad-student Cosimo Petracchi. How do you make sense of the famous controversy between “Keynes” and the “Classics/Monetarist”? I have been thinking about this topic for a long time. 1/7

https://twitter.com/nberpubs/status/1429080852651073540

Especially how to make sense of a series of very confusing empirical papers written in the 70’s that claimed to “test for the liquidity trap” --- finding that it did not exist. I came across this work early on in my carrier back in early 2000’s. 2/7

The more I look at the numbers behind the 1.9 trillion Biden fiscal plan, the less I am concerned about the risk of "overheating" 1/n The key observation is that direct checks only account for 25% of the plan 2/n

Scott Sumner coins a fun term the “Princeton School of Macro” for the work in monetary economics at Princeton from the mid 1990’s to mid 2005 in this podcast directory.libsyn.com/episode/index/… 1/n Sumner associates it to influential work done the ZLB during this period by Krugman, Svensson, Bernanke, Woodford and yours truly. 2/n