Sunday, January 24, 2010

Assimilated by the banking Borg: Krugman on Bernanke (amv)

Paul Krugman is half right in his moderate critique of Ben Bernanke. I would not blame Bernanke for missing the housing bubble in contrast to ex post justified bubble-hunters. There always are doomsayers who turn out to be right for the same reason that more reasonable economists turn out to be wrong: coincidence. I share some of Krugman's sentiments on Bernanke's inability to temper influential inflation hawks, which I usually am  - not influential, just a hawk - but not as long as unemployment increases to double digits:

Top panel: Black line is the value of subsequent average 2-year inflation rate (πt+8) corresponding to each indicated date t Blue line is the predicted value from the dynamic regression for each indicated date t. Bottom panel: unemployment rate as of last month of indicated quarter t.

I guess that puts me in the PC camp of my buddies. HT Econbrowser