Articles and Publications
A 50-Year Retrospective On The Shadow Open Market Committee And Its Role In Monetary Policy
Here's a lengthy paper I wrote with Professor Michael Bordo that assesses the 50-year history of the Shadow Open Market Committee and the evolution of monetary policy since the 1970s. We presented the paper at the 50th Anniversary SOMC meeting that was sponsored by the Hoover Institution of Stanford University held on October 13-14. The paper describes the SOMC's monetary policy recommendations and research, summarizing over 560 position papers by its members, and analyzes the Committee's stances and influences as the Fed's interpretation of its dual mandate has shifted over the years. Researching and writing the paper was my big summer project and I hope you like it.
The Antigrowth Agendas of Harris and Trump
Wall Street Journal Commentary by Mickey D. Levy: The economic platforms of both presidential candidates are littered with antigrowth proposals.The Biden platform, on which Kamala Harris will presumably run, is a pumped-up version of typical Democratic policies. It features significant increases in taxes and spending.Donald Trump is proposing to hold the line on spending and current tax policy but would raise tariffs and pursue an economically destructive immigration policy. The resilience and resourcefulness of the U.S. private sector is remarkable, but why test it with these wrongheaded proposals?
Levy: Fed’s System of Estimating and Communicating Dots Needs Changes
At the conclusion of its FOMC meeting this Wednesday, the Fed will release its quarterly Summary of Economic Projections (SEPs). In this podcast episode of Central Bank Central, Kathleen Hays and I discussed expected changes in the Fed's projections, the history of the SEPs, and common misperceptions. Based on a recent paper co-authored with Charles Plosser, former President of the Federal Reserve Bank of Philadelphia, and presented to the Hoover Monetary Policy Conference ("The Fed's Strategic Approach to Monetary Policy Needs a Reboot", May 2-3, 2024) and last week's related Wall Street Journal Commentary ("What the Fed Doesn't Communicate, June 6, 2024), I provide suggestions for how the Fed should modify and improve the SEPs.
What the Fed Doesn’t Communicate
WSJ Commentary: Every quarter the Federal Reserve publishes a summary of economic projections. The one released during next week’s Federal Open Market Committee meeting will be scrutinized for information on the central bank’s view of inflation, economic conditions and interest rates. Though the Fed releases these summaries with the best of intentions, its estimates of the appropriate policy rate are frequently off the mark. It needn’t be this way. The central bank can modify its methodology to improve its policy deliberations and how it communicates. This opinion piece by By Mickey D. Levy and Charles I. Plosser makes recommendations for improving the Fed's quarterly Summary of Economic Projections. Some of the recommendations — such as including Taylor Rule estimates alongside the FOMC's projections and asking FOMC members to provide estimates for different scenarios — might make the Fed uncomfortable, but they would enhance the exercise.
The Fed’s Strategic Approach to Monetary Policy Needs a Reboot
Fed Chair Powell has announced the Fed will conduct a strategic review of monetary policy later this year. This article, co-written by Mickey D. Levy and Charles I. Plosser, focuses on the characteristics and failures of the strategic framework that the Fed adopted in 2020 and how this framework contributed to monetary policy mistakes and high inflation. It provides suggestions on issues the Fed should consider in its upcoming strategic review.
America’s Economic Riddle
This is a podcast conversation between Mickey Levy and Bill Whalen of the Hoover Institution at Stanford University. It was part of Whalen's podcast series Matters of Policy & Politics. The pair discusses trends in employment and unemployment, factors underlying inflation, and the implications of dramatically higher prices during this presidential election year. With the "misery index" (the sum of the rates of inflation and unemployment) so low, why do so many express unhappiness with economic performance? They then discussed the difficult issues facing the Federal Reserve, and prospects for monetary policy and interest rates.
Time for Fed to Recalibrate View of What’s Restrictive?
Here is an interview with Kathleen Hays on her podcast, Central Bank Central. It is based on Levy's Wall Street Journal opinion piece, "The Fed's Latest Problem: A Strong Economy." The discussion sets the stage for assessing the upcoming Fed semiannual Monetary Policy Report to Congress and the March 19-20 FOMC meeting in which the Fed will provide its updated Summary of Economic Projections.
The Fed’s Latest Problem: A Strong Economy
WSJ Commentary: My original title was "Strong Real Growth and High Real Rates." My general thrust is that following the monetary and fiscal excesses in response to the negative shock of the pandemic that generated high inflation, the Fed must now adjust its monetary policy to reflect the pickup in productivity and economic growth that raise the natural real rate of interest. The higher real rates provide less room for the Fed to lower rates and remain consistent with its 2% inflation target.
Interview on Central Bank Central Podcast with Kathleen Hays
Kathleen Hays interviewed Mickey D. Levy about the tough balancing act ahead for the fed as a key inflation gauge remains high.
The Fed Won’t Try to Boost Biden
Wall Street Journal Commentary: The central bank has only once changed its policy to help elect a presidential candidate: Nixon in 1972.
We’re Still Paying for the Federal Reserve’s Blunders
Wall Street Journal Op-Ed: Inflation has come down, but prices are still high, and Congress is spending at an unsustainable rate.
China’s Bill Comes Due
No longer a driver of global economic growth, Beijing must confront new risks of its own making. This article by Dr. Levy was published in the Hoover Institution's "defining ideas" series in September 2023.