updated: April 12, 2013

Friday, April 12

7:30 AM

Breakfast & Registration


Welcome & Opening Remarks

Eric S. Rosengren (Federal Reserve Bank of Boston)

Remarks: "Should Full Employment Be a Mandate for Central Banks?"


Session 1: Full Employment as a Guide for Monetary Policy

Christopher Erceg and Andrew Levin (International Monetary Fund)

Paper pdf

Deciding on how much weight policymakers should place on employment when conducting monetary policy remains contentious, even when they have an explicit goal for employment/employment goal. For example, difficulties estimating full employment often are cited as the reason for relying more on price, rather than employment, signals. This paper will revisit some of the issues, from both a theoretical and a practical standpoint, pertaining to the degree to which monetary policy should respond to changing labor market conditions. Moreover, how should uncertainty about the value of the employment target affect the path of monetary policy?
Presenter: Christopher Erceg
Discussant: Athanasios Orphanides (MIT Sloan School of Management)
Moderator: Joe Peek (Federal Reserve Bank of Boston)



Session 2: Assessing the Natural Rate of Unemployment

John Abowd, Lars Vilhuber, and Tirupam Goel (Cornell University)

Paper pdf

How much do geographical and sectoral shifts in labor demand contribute to variation in the natural rate of unemployment? How important are demographic changes in moving the natural rate? What do various approaches for estimating the natural rate of unemployment say about its current value? How informative is a more aggregate approach looking at wages and prices for assessing the current value of the natural rate of unemployment? From a more disaggregated perspective, the recent crisis began in the housing market and has hit the construction sector relatively hard, particularly in certain geographic areas. Is the current functioning of the labor market being hindered by either a skills or geographic mismatch? Is there evidence that the reservation wage of currently unemployed workers is too high and a contributing factor to their long spells of unemployment? How important are all these factors in slowing labor market clearing, and what are these implications for the equilibrium rate of unemployment in the medium and long runs?
Presenter: John Abowd
Discussant: Christopher Foote (Federal Reserve Bank of Boston)
  Moderator: Joe Peek (Federal Reserve Bank of Boston)
12:15 PM



Session 3: How Well Does the Fed Estimate the Natural Rate?

Giovanni Olivei and FabiĆ  Gumbau-Brisa (Federal Reserve Bank of Boston)

Paper pdf

Uncertainty about the exact level of full employment requires the Fed to base policy on its estimate of full employment. Given the importance of the estimated natural rate of unemployment in guiding monetary policy, what are the characteristics of the Fed’s estimate of the path of the natural rate? How variable have the ex-ante values been relative to the ex-post values? How quickly does the Fed adjust its measure of the natural unemployment rate when evidence suggests that the estimated value is too low or too high? How would the path of monetary policy have differed based on the ex-post values for the natural unemployment rate, and how large were the costs of those deviations?
  Presenter: Giovanni Olivei
  Discussant: David Reifschneider (Board of Governors of the Federal Reserve System)
  Moderator: J. Christina Wang (Federal Reserve Bank of Boston)



Session 4: Wage Adjustment and Full Employment in a Low Inflation Environment

Bart Hobijn and Mary Daly (Federal Reserve Bank of San Francisco)

Paper pdf

The response of wages during the recent recession and ongoing recovery has been fairly modest. This paper will consider recent wage behavior using macro and, if possible, micro-level data, putting it in an historical context. What are the reasons for the slow wage adjustment? Is downward nominal wage rigidity playing an important role? How much weight should policymakers place on wage changes under current circumstances when assessing how far the economy is from attaining full employment? Does the signal quality decline with the target rate of inflation?  What have we learned about wage inflexibility from the recent episode, and should any such lessons affect our views of the most appropriate value for the inflation target?
  Presenter:  Bart Hobijn
  Discussant: Truman F. Bewley (Yale University)
  Moderator: J. Christina Wang (Federal Reserve Bank of Boston)

Session 5: The Effects of Macroeconomic Shocks on Well-Being

David Blanchflower (Dartmouth College) and David Bell (University of Stirling)

Paper pdf

This paper will discuss the evidence from different polls about how people view the costs of inflation relative to the costs of being unemployed. While the Misery Index, the sum of the unemployment rate and the inflation rate, assigns equal weights to the two components, it is unlikely that public perceptions are that simplistic, or even that the weights remain constant over time no matter the magnitudes of the unemployment and inflation rates. How are the views of households reflected, if at all, in the way central bankers are conducting monetary policy? Should policymakers be more “conservative” in weighing the relative costs of inflation and unemployment than the general public might be?   
  Presenter:  David Blanchflower
Discussant: Carol Graham (The Brookings Institute)
Moderator: J. Christina Wang (Federal Reserve Bank of Boston)


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Saturday, April 13

7:30 AM



Session 6: The Scarring Effect of Unemployment Spells

Daiji Kawaguchi and Tetsushi Murao (Hitotsubashi University)

Paper pdf

The high and persistent unemployment rate since mid-2008 in several developed countries raises the issue of potential long-term adverse labor market outcomes for some cohort of workers. This paper examines the empirical evidence on the scarring effect of unemployment spells using data from OECD countries, looking at cohort-specific effects both in terms of wage dynamics and in terms of participation to the labor force. Are there cohort of workers that are more affected by a prolonged unemployment spell, and if so why? What are the labor market features that explain cross-country heterogeneity in the effect of unemployment spells on workers’ compensation and participation to the labor force in the longer run?

Presenter: Daiji Kawaguchi
Discussant: Juan Dolado (Universidad Carlos III de Madrid)
Moderator: Robert K. Triest (Federal Reserve Bank of Boston)



Session 7: Macroeconomic Evidence on the Longer Term Effects of Business Cycles

Antonio Fatás and Ilian Mihov (INSEAD)

Paper pdf

The recovery from the last recession has been slower than any of the other recoveries in the post-WWII period, both in the United States and in many other advanced economies. This sluggishness has led to a debate about the potential reasons. Are recoveries from financial crises slower? Are there any structural factors that are constraining the speed of recovery? Does the speed of the recovery have implications for longer-term macroeconomic outcomes? The session will discuss the phases of the business cycle, the timing of recoveries, and the potential longterm effects of business fluctuations.
Presenter: Antonio Fatás
Discussant: Laurence Ball (Johns Hopkins University)
Moderator: Robert K. Triest (Federal Reserve Bank of Boston)


12:30 PM

Panel Session: How Much Relative Weight Should Policymakers Place on Employment, and How Much on Inflation?

This panel will bring together policymakers to discuss their own viewpoints in terms of how to weigh inflation relative to employment in the conduct of monetary policy. Panelists will also discuss how central banks should determine the speed of adjustment towards the achievement of their mandated goals.
Panelists: Charles Evans (Federal Reserve Bank of Chicago)
Narayana Kocherlakota (Federal Reserve Bank of Minneapolis)
David Miles (Bank of England)
Lars Svensson (Sveriges Riksbank)
Moderator: Jeff Fuhrer (Federal Reserve Bank of Boston)

Conference Adjournment

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