Richard Clarida on FAIT, R-Star, and the Future of the Fed’s Framework
Apr 29, 2024
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Richard Clarida, former Vice Chair of the Federal Reserve, discusses the future of Fed's framework, FAIT, and R-Star. He reflects on bridging academic economics with real-world markets, his policy journey, and Fed's strategic planning post-pandemic. Clarida analyzes the adoption of FAIT in 2020, challenges at the zero lower bound, and predictions for bond yields and policy rates.
Richard Clarida shared insights on his journey through the policy world, highlighting challenges and Fed's framework review.
Clarida discussed the evolution of monetary policy, emphasizing key research collaborations and influential papers.
Insights on potential shifts in monetary policy and rate projections were provided, focusing on equilibrium real yields and policy rates.
The podcast episode uncovered Clerida's impactful career, from academic influences to policy roles and future monetary policy trajectories.
Deep dives
Overview of the New AI Chat Bot and Discord Server
The Macro Musings team has introduced the Macro Muse Bot, an AI chat bot powered by insights from over 400 episodes of the show. This bot enables users to explore cited papers and books, engage with various guest perspectives, discover relevant archival episodes, and more. Additionally, the team has launched a Discord server for listeners to interact with the show, fellow listeners, and host David Beckworth, providing an opportunity for deeper engagement with Macro Musings content.
Guest Introduction and Insightful Discussions
Rich Clerida, a distinguished academic and policymaker, was featured as a guest on the podcast. He shared insights on his academic and policy work, reflecting on his substantial contributions to New Keynesian macroeconomics, international macro, and involvement in policymaking with notable figures like President Reagan and George W. Bush. Throughout the episode, Clerida delved into his journey as an economist and the impactful moments that shaped his impressive career.
Exploring Early Career Influences and Academic Path
In a revealing conversation, Rich Clerida traced his early career influences to his freshman days at the University of Illinois, highlighting pivotal moments that sparked his passion for macroeconomics. From dynamic professors to hands-on research experiences, Clerida shared how his journey unfolded, leading him from eager student to seasoned economist focused on macroeconomic intricacies.
Insights on Monetary Policy and Research Collaborations
Rich Clerida delved into his insights on monetary policy evolution over the years and the collaborative research endeavors that contributed to shaping his views. He explored the impactful research collaborations with notable economists such as Mark Gertler and Jordi Gali, shedding light on key papers like 'The Science and Monetary Policy,' offering a glimpse into the development of pivotal ideas in the field.
Reflections on Federal Reserve Role and Framework Review
Rich Clerida provided valuable reflections on his tenure as the Vice Chair of the Federal Reserve Board, detailing the significant responsibilities and challenges he encountered. Among key highlights were insights on the Fed's framework review, including the introduction of the Flexible Average Inflation Target (FAIT) and the intricacies of implementing forward guidance amidst unprecedented economic shocks. Clerida's reflections offer a deep dive into the nuanced decisions and considerations at the helm of monetary policy.
Previewing Future Monetary Policy Directions and Rate Projections
Looking ahead, Rich Clerida discussed potential shifts in monetary policy directions and rate projections, emphasizing the importance of distinguishing between riskless real yields on long-term bonds and short-term T-bills. Considering the evolving economic landscape and debt dynamics, Clerida shared perspectives on where equilibrium real yields and policy rates might head, touching on the interplay of factors such as term premium, treasury debt dynamics, and infrastructure investments.
Summary and Closing Remarks
In conclusion, Rich Clerida's insightful podcast episode uncovered a treasure trove of experiences, from early academic influences to impactful policy roles and groundbreaking research collaborations. The episode encapsulated Clerida's journey as an economist and policymaker, offering deep insights into his contributions to monetary economics and forecasting future monetary policy trajectories amidst changing economic landscapes.
Meritus Center at George Mason University and Podcast Subscription
This episode of Macro Musings is produced by the Meritus Center at George Mason University. For more in-depth monetary policy research, visit mercatus.org/monetarypolicy. Subscribe to the podcast on platforms like Apple Podcasts and Spotify to stay updated on future episodes. Engage with the host David Beckworth on Twitter at @DavidBeckworth and follow the show at @macro_musings.
Richard Clarida is a well-known academic and policymaker who most recently was the Vice Chair of the Federal Reserve Board of Governors. Richard is currently a professor of economics at Columbia university and is also a managing director at PIMCO. Richard joins David on Macro Musings to talk about his academic and policy work, as well as his outlook for FAIT, the Fed’s framework review, the future of R-Star, and more.
