Loretta Mester was president and CEO of the Federal Reserve Bank of Cleveland from 2014 through June of 2024, and she is a 39-year veteran of the Federal Reserve System. Loretta is also currently an adjunct professor of finance at the Wharton School at the University of Pennsylvania. She joins David on Macro Musings to talk about her time Fed president and a recent paper she delivered on the Fed’s operating system. David and Loretta also discuss the ongoing battle against inflation, what to expect from the upcoming Fed framework review, and much more.

Transcript for this week’s episode.

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Loretta’s Cleveland Fed profile

Loretta’s Wharton profile

David Beckworth’s Twitter: @DavidBeckworth

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Related Links:

*The Fed’s Ample Reserves Monetary Policy Operating Framework: It Isn’t as Simple as it Looks* – Remarks by Loretta Mester for the Panel on The Conduct of Monetary Policy: Evolution from Free Reserves to the Corridor and Floor Systems at the Shadow Open Market Committee 50th Anniversary Conference

*Reserve Demand Elasticity (RDE)* by the Federal Reserve Bank of New York

Timestamps:

(00:00:00) – Intro

(00:02:18) – Loretta’s Career Path and Tenure at the Cleveland Fed

(00:10:42) – The Ongoing Battle Against Inflation

(00:17:53) – Evaluating FAIT and What to Expect from the 2024-25 Fed Framework Review

(00:26:03) – Corridor vs. Floor: The Evolution of the Fed’s Operating System and its Policy Implications

(00:41:31) – Estimating the Demand for Bank Reserves

(00:45:57) – Addressing Over-reliance on the Fed in the Interbank Market

(00:52:45) – Loretta’s Thoughts on Central Clearing and Increased Use of the Discount Window

(00:55:23) – Outro

Joseph Gagnon is a senior fellow at the Peterson Institute for International Economics, a former senior Fed staffer, and a returning guest to the podcast. Joe rejoins David on Macro Musings to talk about the unholy trinity behind the COVID inflation surge and what history can teach us about the unusual inflation experience of that period. David and Joe also discuss the inflationary lessons from the Korean War, the Fed’s upcoming framework review, and much more.

Transcript for this week’s episode.

Joseph’s Twitter: @GagnonMacro

Joseph’s PIIE profile

David Beckworth’s Twitter: @DavidBeckworth

Follow us on Twitter: @Macro_Musings

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Related Links:

*What Caused the U.S. Pandemic-Era Inflation?* by Ben Bernanke and Olivier Blanchard

*Understanding U.S. Inflation During the COVID Era* by Laurence Ball, Daniel Leigh, and Prachi Mishra

Timestamps:

(00:00:00) – Intro

(00:02:46) – Predicting the Post-Pandemic Inflation Surge

(00:06:39) – Assessing the State of the Bond Market and Inflation Expectations After the Inflation Surge

(00:16:14) – What Caused the U.S. Pandemic-Era Inflation: Breaking Down the Literature

(00:23:45) – *The Trinity of COVID-Era Inflation in G7 Economies*

(00:32:55) – *Why Did Inflation Rise and Fall So Rapidly? Lessons from the Korean War*

(00:42:06) – Inflation, FAIT, and the Upcoming Fed Framework Review

(00:49:18) – Why Should the Fed Consider Nominal GDP Targeting?

(00:53:04) – Responding to the Measurement Issue Surrounding Nominal GDP

(00:57:40) – Outro

Emilio Ocampo is a professor of finance and economic history at UCEMA. He has written widely on the Argentine economy and has advised President Javier Milei on economic policy. Emilio joins David on Macro Musings to talk about the current state of the Argentine economy, the present and ongoing reforms of President Milei, and the prospects for dollarization in Argentina.

Transcript for this week’s episode.

Emilio’s Twitter: @ocampo_emilio

Emilio’s Substack

Emilio’s UCEMA profile

David Beckworth’s Twitter: @DavidBeckworth

Follow us on Twitter: @Macro_Musings

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Related Links:

*Commitment Devices with Time Inconsistency Disease and Institutional Anomie: The Case of Argentina* by Emilio Ocampo

*Dollarization: A Solution for Argentina* by Emilio Ocampo and Nicolas Cachanosky

*Argentina Scrapped Its Rent Controls. Now the Market is Thriving* by Ryan Dube

Timestamps:

(00:00:00) – Intro

(00:03:58) – Assessing Argentina’s Progress on Lowering Inflation

(00:11:12) – Exploring the Causes of Argentina’s Poor Economic Performance

(00:15:20) – *Commitment Devices with Time Inconsistency Disease and Institutional Anomie*

(00:26:29) – Javier Milei’s Plan to Revive Argentina

(00:31:39) – The Next Steps for Argentine Economic Reform

(00:39:56) – Defining Dollarization and Exploring its Historical Cases

(00:49:33) – Transitioning to Dollarization in Argentina

(00:55:12) – Dollarization Concerns and the Prospects for Dollarization Moving Forward

(00:58:48) – Outro

Jonathon Hazell is an assistant professor of economics at the London School of Economics and is a returning guest to the podcast. He rejoins David on Macro Musings to talk about the costs of inflation, the Phillips curve Debate, and the lessons learned from the post-pandemic inflation surge.

Transcript for this week’s episode.

Jonathon’s Twitter: @JADHazell

Jonathon’s website

Jonathon’s LSE profile

David Beckworth’s Twitter: @DavidBeckworth

Follow us on Twitter: @Macro_Musings

Check out our new AI chatbot: the Macro Musebot!

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Related Links:

*Why Do Workers Dislike Inflation? Wage Erosion and Conflict Costs* by Jonathon Hazell, Joao Guerreiro, Chen Lian, and Christina Patterson

*Do Deficits Cause Inflation? A High Frequency Narrative Approach* by Jonathon Hazell and Stephan Hobler

*Jonathon Hazell on Phillips Curves, Wage Rigidity, and How to Measure R-Star* by Macro Musings

*The Dominant Role of Expectations and Broad-Based Supply Shocks in Driving Inflation* by Paul Beaudry, Chenyu Hou, and Franck Portier

Timestamps:

(00:00:00) – Intro

(00:05:27) – Breaking Down the Costs of Inflation

(00:08:45) – *Why Do Workers Dislike Inflation? Wage Erosion and Conflict Costs*

(00:21:12) – Outlining the Policy Implications

(00:27:24) – The Recent Phillips Curve Conversation: What Have We Learned?

(00:34:43) – *Do Deficits Cause Inflation? A High Frequency Narrative Approach*

(00:46:39) – Navigating the Alternative Macroeconomics Perspectives

(00:51:33) – Evaluating the Supply vs Demand Story for the Post-Pandemic Inflation

(00:55:09) – Outro

Thomas Drechsel is an assistant professor of economics at the University of Maryland. He joins David on Macro Musings to talk about the political pressure on the Fed and the new ways to measure monetary policy shocks. Thomas and David also discuss fiscal and monetary dominance, the impact of political pressure on inflation, why we should care about central bank independence, and more.

Transcript for this week’s episode.

Thomas’s website

Thomas’s Twitter: @td_econ

David Beckworth’s Twitter: @DavidBeckworth

Follow us on Twitter: @Macro_Musings

Check out our new AI chatbot: the Macro Musebot!

Join the new Macro Musings Discord server!

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Related Links:

*Estimating the Effects of Political Pressure on the Fed: A Narrative Approach with New Data* by Thomas Drechsel

*Identifying Monetary Policy Shocks: A Natural Language Approach* by S. Boragan Aruoba and Thomas Drechsel

*Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence* by Alberto Alesina and Lawrence Summers

*Narrative Sign Restrictions for SVARs* by Juan Antolin-Diaz and Juan Rubio-Ramirez

*Threats to Central Bank Independence: High-Frequency Indentifcation with Twitter* by Francesco Bianchi, Thilo Kind, and Howard Kung

*A New Measure of Monetary Shocks: Derivation and Implications* by Christina Romer and David Romer

Timestamps:

(00:00:00) – Intro

(00:04:47) – Why Should We Care About Central Bank Independence?

(00:08:01) – Fiscal and Monetary Dominance

(00:12:41) – Estimating the Effects of Political Pressure on the Fed

(00:27:14) – Breaking Down the Research Results

(00:36:46) – The Impact of Political Pressure on Inflation

(00:43:07) – Identifying Monetary Policy Shocks: Background, Methodology, and Results

(00:59:45) – Outro