Wednesday, January 13, 2010

More on Bernanke's AEA Speech

Here are more responses to Bernanke's AEA speech where he defended the Fed's low interest rate policies in the early-to-mid 2000s:

(1) John Taylor in the WSJ
(2) John Taylor on Economics One
(3) David Papell at Econbrowser
(4) John Hilsenrath at WSJ [update: video]
(4) Mark Thoma & Vernon Smith on Economist's View
(5) Josh Hendrickson at Everyday Economist

These responses are consistent with my own thoughts on Bernanke's speech. Finally, it is worth noting that Brad DeLong acknowledges that the federal funds rate may have been too low at the time. However, he has a hard time seeing how the low interest rates could have been an important contributor to the housing boom. Let me first say I am glad that Brad DeLong is at least open to the idea that interest rates may have been too low. Second, I would encourage him to look beyond the normal monetary transmission channels in assessing how important the low federal funds rates were to the housing boom. There is obviously more to the story than just low interest rates, but one should not underestimate the effect of them in light of the risk taking channel of monetary policy.

1 comment:

  1. Have you taken a look at Caballero
    http://papers.nber.org/papers/w15636#fromrss
    Tyler Cowen called it the most brilliant paper yet on the financial crisis.

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