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Scariest Economics Paper of 2022

 To bring price increases down to 2%, we may need to tolerate unemployment of 6.5% for two years.

The paper is a painstaking empirical exploration by Johns Hopkins macroeconomist Larry Ball with co-authors Daniel Leigh and Prachi Mishra of the International Monetary Fund released by the Brookings Papers on Economic Activity. 

Jason Furman WSJ 7 September 2022 


The paper 


Fed Inflation Battle to Spur Greater Economic Harm Than Realized

Fed Chair Jerome Powell and his colleagues will probably have to push unemployment significantly higher in order to hit their 2% inflation target, according to one of the papers prepared for a Sept. 8-9 Brookings Institution conference. 

A second study warns of dangers for developing nations due to rising US interest rates and a strengthening dollar. Those economies are particularly vulnerable because of a build-up in debt by the public-sector and businesses during the pandemic, much of it in dollars, they said.  

“Danger signals are flashing already,” they wrote. “A contractionary phase of the global financial cycle is now underway.”

Bloomberg 8  september 2022 


Federal Reserve Chairman Jerome Powell said 

the central bank is squarely focused on bringing down high inflation to prevent it from becoming entrenched as it did in the 1970s.

WSJ 8 September 2022


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