Fed Arms Race to Facebook
Fed Arms Race to Facebook
- American Economic Association 2020 meeting was in San Diego
- Gathering draws thousands of economists from around world
Hundreds of papers and presentations are made each January at the annual conference of the American Economic Association. This year’s gathering in San Diego was no exception.
From how much do Facebook and WhatsApp really contribute to economic output, to the “communications arms race” between Fed officials for attention in financial markets, there was a lot to absorb.
Here are some that caught our eyes and ears:
Facebook GDP
Would you give up Facebook for one month in exchange for $50? The question, posed by MIT’s Erik Brynjolfsson and four co-authors of a new paper, may help economists get a better measure of the extent to which new, free technologies are reshaping the economy and our lives. The answer, unsurprisingly, is a lot. They estimate that the social network by itself could add as much as 0.11 percentage points annually to U.S. gross domestic product if measured by its benefit to users.
Upbeat Bernanke
Former Federal Reserve Chairman Ben Bernanke delivered what he called “a relatively upbeat” assessment of the U.S. central bank’s ability to fight the next recession in a paper he presented to the AEA. While the Fed has limited room to cut short-term interest rates because they’re already so low, Bernanke argued that quantitative easing and forward guidance could provide enough extra punch to combat a future economic contraction. “The new policy tools are effective,” Bernanke said in a blog post summarizing his address.
Fed Arms Race
University of California Berkeley professor Annette Vissing-Jorgensen took a look at what she called “the communications arms race” among Fed policy makers. She argued in a paper that Fed officials compete for the attention of financial markets because those who succeed in moving the markets’ policy expectations gain the upper hand in policy making. This leads to a cacophony of public appearances but also to a “quiet cacophony” of informal communication between policy makers and market newsletters or the news media, according to Vissing-Jorgensen.
