Monday, July 14, 2014 1:30pm

Congress and Monetary Policy

Legislation introduced in Congress would require the Federal Reserve to "submit to the appropriate congressional committees…a Directive Policy Rule", which shall "describe the strategy or rule of the Federal Open Market Committee for the systematic quantitative adjustment of the Policy Instrument Target to respond to a change in the Intermediate Policy Inputs." Should the Fed deviate from the rule, the Fed Chair would have to "testify before the appropriate congressional committees as to why the [rule]…is not in compliance." Enacting this provision would improve monetary policy outcomes in the U.S.

Responses
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel
Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Uncertain 1
Given the increasingly important and discretionary role the Fed plays, supervision is essential. Congress may not be the right body to do it
Bio/Vote History
         
Alesina Alberto Alesina Harvard Disagree 9
Bio/Vote History
         
Altonji Joseph Altonji Yale Disagree 4
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Disagree 7
Bio/Vote History
         
Autor David Autor MIT Strongly Disagree 8
Preserving the Fed's autonomy is valuable. Imagine if Congress had been running the Fed during the Financial Crisis --- certain disaster!
Bio/Vote History
         
Baicker Katherine Baicker Harvard No Opinion
Bio/Vote History
         
Banerjee Abhijit Banerjee MIT Disagree 7
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Disagree 2
Bio/Vote History
         
Brunnermeier Markus Brunnermeier Princeton Disagree 4
Rules are very useful, but one has to be careful not undermine central bank's independence, which untie central banks from political cycle.
Bio/Vote History
         
Chetty Raj Chetty Harvard Did Not Answer
Bio/Vote History
         
Chevalier Judith Chevalier Yale Strongly Disagree 9
The Fed's track record in economic policy-making, while imperfect, is vastly superior to that of Congress.
Bio/Vote History
         
Currie Janet Currie Princeton Disagree 7
Such a policy would undermine the independence of the Federal Reserve.
Bio/Vote History
         
Cutler David Cutler Harvard Uncertain 5
Bio/Vote History
         
Deaton Angus Deaton Princeton Disagree 7
Bio/Vote History
         
Duffie Darrell Duffie Stanford Disagree 9
A quantitative formula is not flexible in the face of structural changes, and reduces Fed independence too much. Clear goals are enough.
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Disagree 7
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Disagree 5
Bio/Vote History
         
Einav Liran Einav Stanford Disagree 5
Bio/Vote History
         
Fair Ray Fair Yale Disagree 7
Bio/Vote History
         
Finkelstein Amy Finkelstein MIT Did Not Answer
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Did Not Answer
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Disagree 10
Bio/Vote History
         
Greenstone Michael Greenstone Chicago Disagree 4
Bio/Vote History
         
Hall Robert Hall Stanford Disagree 8
Monetary policy should be based on a target for inflation and unemployment (such as difference between the two) not on an instrument rule
-see background information here
Bio/Vote History
         
Hart Oliver Hart Harvard Disagree 8
No rules would have allowed the Fed to act appropriately in the recent crisis. Better to choose governors well and give them discretion.
Bio/Vote History
         
Holmström Bengt Holmström MIT Strongly Disagree 8
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Did Not Answer
Bio/Vote History
         
Hoynes Hilary Hoynes Berkeley Uncertain 6
Bio/Vote History
         
Judd Kenneth Judd Stanford Strongly Disagree 8
Would not have stopped Nixon-Burns inflation. Greenspan had infinite ability to obfuscate. Do we want Congress defining deviations?
Bio/Vote History
         
Kaplan Steven Kaplan Chicago Disagree 7
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Strongly Disagree 7
Data revisions alone cast doubt on this. Instead let's raise the qualifications and pay of who we appoint. Read this bill, very quirky.
-see background information here
Bio/Vote History
         
Klenow Pete Klenow Stanford Uncertain 6
Too narrow and likely to compromise Fed independence. Something like Norway's Central Bank reports (see p.18-19) could be more useful.
-see background information here
Bio/Vote History
         
Levin Jonathan Levin Stanford Disagree 3
Bio/Vote History
         
Maskin Eric Maskin Harvard Disagree 7
Such legislation seems likely to compromise the Fed's political independence.
Bio/Vote History
         
Nordhaus William Nordhaus Yale Strongly Disagree 9
Has tendency to politicize monetary policy and to promote inflexibility.
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Disagree 3
Bio/Vote History
         
Samuelson Larry Samuelson Yale Disagree 8
The essence of the Fed is to be independent. Congressional meddling is not a set forward.
Bio/Vote History
         
Scheinkman José Scheinkman Princeton Disagree 6
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Strongly Disagree 9
Not a hard call.
Bio/Vote History
         
Shapiro Carl Shapiro Berkeley Strongly Disagree 9
The Fed has served Americans very well over many decades; meddling by politicians would worsen the performance of the Fed and the economy.
Bio/Vote History
         
Shimer Robert Shimer Chicago Uncertain 7
Under current Fed leadership, the statement is likely to be false. Under future leadership, accountability might be justifiable.
Bio/Vote History
         
Stokey Nancy Stokey Chicago Strongly Disagree 8
A central bank should be independent. Look at Argentina as an example of where political oversight leads.
Bio/Vote History
         
Thaler Richard Thaler Chicago Strongly Disagree 7
I can't think of any agency in government that would work better with greater supervision from Congress
Bio/Vote History
         
Udry Christopher Udry Yale Did Not Answer
Bio/Vote History
         

10 New Economic Experts join the IGM Panel


For the past two years, our expert panelists have been informing the public about the extent to which economists agree or disagree on important public policy issues. This week, we are delighted to announce that we are expanding the IGM Economic Experts Panel to add ten new distinguished economists. Like our other experts, these new panelists have impeccable qualifications to speak on public policy matters, and their names will be familiar to other economists and the media.

To give the public a broad sense of their views on policy issues, each new expert has responded to a selection of 16 statements that our panel had previously addressed. We chose these 16 statements, which cover a wide range of important policy areas, because the original panelists' responses to them were analyzed in a paper comparing the views of our economic experts with those of the American public. You can find that paper, by Paola Sapienza and Luigi Zingales, here. The paper, along with other analyses of the experts' views, was discussed during the American Economic Association annual meetings, and the video can be found here.

The new panelists' responses to these statements can be seen on their individual voting history pages. Our ten new economic experts are:

Abhijit Banerjee (MIT)
Markus K. Brunnermeier (Princeton)
Liran Einav (Stanford)
Amy Finkelstein (MIT)
Oliver Hart (Harvard)
Hilary Hoynes (Berkeley)
Steven N. Kaplan (Chicago)
Larry Samuelson (Yale)
Carl Shapiro (Berkeley)
Robert Shimer (Chicago)


Please note that, for the 16 previous topics on which these new panelists have voted, we left the charts showing the distribution of responses unchanged. Those charts reflect the responses that our original panelists gave at the time, and we have not altered them to reflect the views of the new experts.

We have also taken this opportunity to ask our original panelists whether they would vote differently on any of the statements we have asked about in the past. Several experts chose to highlight statements to which they would currently respond differently. In such cases, you will see this "revote" below the panelist's original vote. We think you will enjoy seeing examples of statements on which some experts have reconsidered.

As with the 16 previous statements voted on by new panelists, these "revote" responses are not reflected in the chart that we display showing the distribution of views for that topic: all the charts for previous questions reflect the distribution of views that the experts expressed when the statement was originally posed.

About the IGM Economic Experts Panel

This panel explores the extent to which economists agree or disagree on major public policy issues. To assess such beliefs we assembled this panel of expert economists. Statistics teaches that a sample of (say) 40 opinions will be adequate to reflect a broader population if the sample is representative of that population.

To that end, our panel was chosen to include distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars. The panel members are all senior faculty at the most elite research universities in the United States. The panel includes Nobel Laureates, John Bates Clark Medalists, fellows of the Econometric society, past Presidents of both the American Economics Association and American Finance Association, past Democratic and Republican members of the President's Council of Economics, and past and current editors of the leading journals in the profession. This selection process has the advantage of not only providing a set of panelists whose names will be familiar to other economists and the media, but also delivers a group with impeccable qualifications to speak on public policy matters.

Finally, it is important to explain one aspect of our voting process. In some instances a panelist may neither agree nor disagree with a statement, and there can be two very different reasons for this. One case occurs when an economist is an expert on a topic and yet sees the evidence on the exact claim at hand as ambiguous. In such cases our panelists vote "uncertain". A second case relates to statements on topics so far removed from the economist's expertise that he or she feels unqualified to vote. In this case, our panelists vote "no opinion".

The Economic Experts Panel questions are emailed individually to the members of the panel, and each responds electronically at his or her convenience. Panelists may consult whatever resources they like before answering.

Members of the public are free to suggest questions (see link below), and the panelists suggest many themselves. Members of the IGM faculty are responsible for deciding the final version of each week’s question. We usually send a draft of the question to the panel in advance, and invite them to point out problems with the wording if they see any. In response, we typically receive a handful of suggested clarifications from individual experts. This process helps us to spot inconsistencies, and to reduce vagueness or problems of interpretation.

The panel data are copyrighted by the Initiative on Global Markets and are being analyzed for an article to appear in a leading peer-reviewed journal.

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