Insights From the Fall Meeting of the Brookings Panel on Economic Activity
The?Brookings Panel on Economic Activity is pretty much my favorite conference each year.? (It better be!? I?took over running the Panel with?David Romer in early ’09.)? I’ve found that the best way to keep growing as an economist is to embrace any opportunity to be the dopiest guy in a very smart room, and this latest meeting was no disappointment. I’ve been meaning to write about it for a couple of weeks, but time kept getting away from me.? So I decided to try something different-I popped into the video studio to chat about some of the new findings presented at the Panel.??Here are the highlights:
Two of the smartest young macroeconomists around, Kellogg’s?Jonathan Parker and?Annette Vissing-Jorgensen, presented?new research that overturns the conventional wisdom in labor economics that recessions don’t hit the rich:
Rochelle Edge and?Refet Gürkaynak-a Fed staffer and a former Fed staffer, respectively, presented?amazing new results.? They show that essentially all of the leading approaches to predicting the macroeconomy failed to predict any of the ups and downs in the economy over the past 10-15 years.? And this result holds true if you examine the much-vaunted DSGE models, Bayesian Vector Autoregressions, judgmental forecasts by either the Fed staff, or the consensus among private sector economists.
In fact, I found these results striking enough that I made them the basis of?my latest Marketplace commentary.? You can listen?here.
The current recession has also provided a useful opportunity to examine the state of our safety net.? The authors?Marianne Bitler and?Hilary Hoynes-two of the leading scholars of welfare reform-perform?an exhaustive analysis.? At the end of the day, I’m not so sure that my conclusions are exactly theirs-I’m rather struck by how little poverty has risen, despite the recession.? I’ll plan on returning to this theme sometime soon.
Perhaps the most policy-relevant paper is an analysis by Yale finance gurus?Gary Gorton and?Andrew Metrick, in which they dig into the Shadow Banking system, and provide?a specific proposal for reform:
And there were also terrific papers by?Tom Dee and?Brian Jacob,?evaluating No Child Left Behind, and?Jim Hines‘ analysis of the role that state fiscal policies play in offsetting a recession.