This fall (2014), I returned to the CFE at JHU after nearly 3 years on leave serving as Special Adviser to the Board of Governors of the Fed. It’s great to be back. I’ve returned with a wealth of knowledge and insights that probably could not have been acquired in any other way, and I’m very excited by the prospect of incorporating these insights in my research and teaching.
So what did I do at the Fed? Over this period the Fed’s main policy interest rate was as low as it can go and fiscal policy was a significant drag on economic activity. There is no standard central bank playbook for times like these. Thus, with Chair Bernanke and then Chair Yellen, and with the other leadership at the Fed, I spent most days thinking about, discussing, and sometimes arguing about (but no tantrums) what was most likely to be a constructive way forward. For someone who has spent a lifetime thinking about these issues, this was incredible, fascinating, and at times frightening.
How did the Fed do over this period? I tend to be a tough grader. Given what we know now, I’d say that grades of A+ and D or below are probably off the table. But with the end of this chapter not yet written, an incomplete is probably the most appropriate grade for now.
I can say that in difficult times, the policy environment can become quite corrosive. The spectacle known as Congress is a daily reminder of this. Against this backdrop, the FOMC—the main policymaking body at the Fed—performed much as one might hope. Deep differences exist in society and among experts regarding the appropriate monetary policy for this period. This broad range of views was well represented on the FOMC. Firmly held differences were vigorously, but respectfully, debated. No one seemed to lose sight of the need to form a consensus policy in the face of profound unknowns. I am honored to have served these policymakers.
Back at Hopkins, I’ll be drawing on this amazing experience in my teaching and research. And over coming months I intend share some of my experiences in informal pieces on this CFE website.
It’s great to be back.