Thursday, September 29th, 2011 8:39 pm

Monetary Policy

All else equal, the Fed's new plan to increase the maturity of its Treasury holdings will boost expected real GDP growth for calendar year 2012 by at least one percentage point.

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 4
Expansionary policy, aimed at reducing long-term interest rates. Should be successful but no idea about whether it gets 1% growth for 2012.
Bio/Vote History
         
Alesina Alberto Alesina Harvard Strongly Disagree 8
Bio/Vote History
         
Altonji Joseph Altonji Yale Uncertain 1
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Disagree 3
Bio/Vote History
         
Autor David Autor MIT Disagree 3
1pct increase in real GDP growth is a huge effect! If only it were that easy...
Bio/Vote History
         
Baicker Katherine Baicker Harvard Uncertain 1
Such a big effect seems unlikely.
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Uncertain 1
Bio/Vote History
         
Chetty Raj Chetty Harvard No Opinion
Bio/Vote History
         
Chevalier Judith Chevalier Yale Uncertain 3
Bio/Vote History
         
Currie Janet Currie Princeton Uncertain 2
Bio/Vote History
         
Cutler David Cutler Harvard Uncertain 1
This isn't an area where I know the most recent literature.
Bio/Vote History
         
Deaton Angus Deaton Princeton Disagree 2
Hard to imagine that high long term interests are the problem, or that we know enough to be so sure.
Bio/Vote History
         
Duffie Darrell Duffie Stanford Disagree 4
It is will probably have a positive effect, but 1% of GDP is a lot to expect from a moderate twist.
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Strongly Disagree 9
One percent is a lot. Any effects will be smaller.
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Strongly Disagree 3
Bio/Vote History
         
Fair Ray Fair Yale Strongly Disagree 10
Way too large an effect.
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Disagree 5
The decrease in long term rates is likely to promote growth, but a one percentage boost for 2012 seems excessively optimistic / unfounded.
Bio/Vote History
         
Goldin Claudia Goldin Harvard Uncertain 2
Making more funds available for long-term borrowing need not raise investment with so much uncertainty. Also one %age point is too precise
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Disagree 7
even if it works to lower long term rates, they are already so low it's hard to see how more reduction will induce much more investment etc
Bio/Vote History
         
Greenstone Michael Greenstone Chicago Uncertain 3
I am unaware of convincing empirical evidence.
Bio/Vote History
         
Hall Robert Hall Stanford Disagree 4
Need to be sure the Treasury does not offset the twist. Also most likely that lowering the long Treasury rate has little effect on other rts
Bio/Vote History
         
Holmström Bengt Holmström MIT Did Not Answer
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Disagree 9
Bio/Vote History
         
Judd Kenneth Judd Stanford Did Not Answer
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Strongly Disagree 10
The gains will be tiny. Monetary policy is a poor tool for what ails the economy. The mandate says try it, but political risks are real.
Bio/Vote History
         
Klenow Pete Klenow Stanford Disagree 7
This seems like policy ahead of the evidence. Not that I blame the Fed for trying.
-see background information here
Bio/Vote History
         
Lazear Edward Lazear Stanford Disagree 5
Fed has already used its best weapons. This is fine tuning to the extreme and unlikely to do much. It might not even go in the right directi
Bio/Vote History
         
Levin Jonathan Levin Stanford Disagree 5
Might have some effect but hard to hard to see how it would be anywhere near this large.
Bio/Vote History
         
Maskin Eric Maskin Harvard Disagree 7
Such a change should be helpful, but the 1% magnitude seems too big.
Bio/Vote History
         
Nordhaus William Nordhaus Yale Disagree 8
Very likely to increase real output, but the effect is probably in the 0 - 1/2 percent range.
Bio/Vote History
         
Obstfeld Maurice Obstfeld Berkeley Strongly Disagree 10
1% is a huge effect to forecast given (i) modest effect on long-term interest rates and (ii) uncertain effect of long-term rates on activity
Bio/Vote History
         
Rouse Cecilia Rouse Princeton Uncertain 5
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Uncertain 3
Bio/Vote History
         
Scheinkman José Scheinkman Princeton No Opinion
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Disagree 4
I expect a positive impact, as the Fed plainly does. But one percentage point seems implausibly large -- at least to a micro person...
Bio/Vote History
         
Shin Hyun Song Shin Princeton Uncertain 6
Bio/Vote History
         
Stock James Stock Harvard Disagree 8
Reducing long term rates by (say) 25 basis points or less is likely to have a positive but small effect on short-term growth.
Bio/Vote History
         
Stokey Nancy Stokey Chicago Uncertain 1
There is little or no evidence one way or the other---little basis for *anyone* to feel confident.
Bio/Vote History
         
Thaler Richard Thaler Chicago No Opinion
Not a monetary economist. No idea.
Bio/Vote History
         
Udry Christopher Udry Yale Uncertain 1
Bio/Vote History
         
Zingales Luigi Zingales Chicago Strongly Disagree 9
We Are not even sure it can impact the real rate, let alone growth
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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