Krugman’s blog, 9/26/15

There was one post on Saturday, “Economics: What Went Right:”

Sorry about lack of music. I was traveling while suffering from a cold, and the combination of congestion and pressure changes was really, really unpleasant. OK now, I think.

I’m at EconEd; here are my slides for later today. The theme of my talk is something I’ve emphasized a lot over the past few years: basic macroeconomics has actually worked remarkably well in the post-crisis world, with those of us who took our Hicks seriously calling the big stuff — the effects of monetary and fiscal policy — right, and those who went with their gut getting it all wrong. (Matt O’Brien has been reminding us of Michael Kinsley’s insistence that inflation was coming — and his refusal to conclude from the experience that people like me might, you know, actually know something.)

One thing I do try is to concede that one piece of the conventional story hasn’t worked that well, namely the Phillips curve, where the “clockwise spirals” of previous protracted large output gaps haven’t materialized. Maybe it’s about what happens at very low inflation rates.

What’s notable about the Fed’s urge to raise rates, however, is that Fed officials, including Janet Yellen, are acting as if they have high confidence in their models of inflation dynamics –which is the one thing we really haven’t done well at recently. I really fear that we’re looking at incestuous amplification here.

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