James Bullard - Key Policy Papers

  • Inflation Targeting and Alternatives:
    "Allan Meltzer and the Search for a Nominal Anchor." Speech, Delivered at “Meltzer’s Contributions to Monetary Economics and Public Policy,” Philadelphia, Pa., Jan. 4, 2018.

    Cites Allan Meltzer’s research on the run-up to the Great Inflation of the 1970s and early 1980s and contrasts that period with the inflation targeting era of the past two decades, when inflation was brought under control. Beyond inflation targeting, the question is posed of whether there could be additional gains to the U.S. economy by being more explicit about the future actions of monetary policymakers.
  • Yield Curve:
    "Assessing the Risk of Yield Curve Inversion." Presentation, Regional Economic Briefing, Little Rock, Ark., Dec. 1, 2017.

    Discusses the possibility of U.S. yield curve inversion and suggests that, with inflation below the Fed’s 2 percent target, it is unnecessary to push monetary policy normalization to such an extent that the yield curve inverts. Such an inversion—whereby short-term interest rates exceed long-term interest rates—has helped predict recessions in the past.
  • The St. Louis Fed's New Characterization of the Macroeconomic and Monetary Policy Outlook:
    "The St. Louis Fed's New Characterization of the Outlook for the U.S. Economy." Announcement, June 17, 2016.

    "A New Characterization of the U.S. Macroeconomic and Monetary Policy Outlook." Speech, Society of Business Economists Annual Dinner, London, United Kingdom, June 30, 2016.

    "New Characterization of Outlook." Interview with Bloomberg, July 1, 2016.

    "A Tale of Two Narratives." Presentation, St. Louis Gateway Chapter of the National Association for Business Economics (NABE), July 12, 2016.

    Discussion with Minneapolis Fed President Neel Kashkari on U.S. Economy. Official Monetary and Financial Institutions Forum, St. Louis, July 15, 2016.

    "The Economy and Monetary Policy." Interview on Wharton Business Radio, August 12, 2016.

    "Normalization: A New Approach." Presentation, Wealth and Asset Management Research Conference, Olin Business School, Washington University in St. Louis, August 17, 2016.

    "One Equation to Understand the Current Monetary Policy Debate." Presentation, Association for University Business and Economic Research (AUBER), 2016 Fall Conference, Fayetteville, Ark., October 24, 2016.

    "Safe Real Interest Rates and Fed Policy." Presentation, Commerce Bank 2016 Annual Economic Breakfast, St. Louis, Mo., November 10, 2016.

    "U.S. Monetary Policy in the Aftermath of the U.S. Presidential Election." Presentation, UBS European Conference 2016, Monetary Policy after QE, London, United Kingdom, November 16, 2016.

    "The Low Real Interest Rate Regime Post-Election: Is There a Switch?" Presentation, 53rd Annual Economic Forecast Luncheon, W.P. Carey School of Business, ASU, Phoenix, Ariz., December 5, 2016.

    "Five Macroeconomic Questions for 2017." Presentation, Forecasters Club of New York, New York, N.Y., January 12, 2017.

    "An Illustrative Calculation of r." Presentation, Federal Reserve Bank of Atlanta 22nd Annual Financial Markets Conference, Amelia Island, Fla., May 8, 2017.

    "An Illustrative Calculation of r with Policy Implications." Presentation. Federal Reserve Bank of St. Louis Central Bank Forecasting Conference, St. Louis, Mo., November 9, 2017.

    "Bullard on R-Star: The Natural Real Rate of Interest." Presentation. 34th Annual National Association for Business Economics (NABE) Economic Policy Conference, Washington, D.C., February 26, 2018.

    The St. Louis Fed’s new characterization of the U.S. macroeconomic and monetary policy outlook more explicitly takes into account uncertainty about possible medium- and longer-run outcomes. The new approach is based on the idea that the economy may visit a set of possible regimes instead of converging to a single, long-run steady state. Examples of regimes include periods of no recession and recession, periods of low productivity growth and high productivity growth, and periods of low returns on government debt and high returns.

    This new approach delivers a simple forecast of key macroeconomic variables over the next 2.5 years: real output growth of 2 percent, unemployment of 4.7 percent and inflation of 2 percent. Under this regime, the appropriate policy rate path would be 0.63 percent over the forecast horizon.

    Regimes are generally viewed as persistent, and optimal monetary policy is viewed as regime-dependent. For the longer run, the new approach does not contain forecasts for macroeconomic variables or the policy rate, as predicting exactly how and when a regime will change is difficult.
  • Permazero:
    "Permazero in Europe?" Presentation, Frankfurt am Main, Germany.

    "Permazero as a Possible Medium-term Outcome for the U.S. and the G-7." Presentation, Philadelphia, Pa.
    "Permazero." Speech, Washington, D.C.

    Discusses some recent "neo-Fisherian" ideas and what they might mean for the G-7 monetary policy outlook over the medium and long term. The Fisher equation (nominal rate = real interest rate + expected inflation) is a key element of modern macroeconomic models. It implies that a low interest rate policy can determine a low inflation long-run equilibrium. Models, empirical evidence and consequences are discussed.
  • Income inequality:
    "Income Inequality and Monetary Policy: A Framework with Answers to Three Questions." C. Peter McColough Series on International Economics, Council on Foreign Relations, New York.

    Considers U.S. income, wealth, and consumption inequality through the lens of a standard life cycle framework, and argues that a large fraction (perhaps 75%) of observed inequality in income and wealth is benign, because credit markets work to translate these disparities into relatively smooth consumption over the life cycle. Three questions are posed and answered concerning the monetary policy impact on this process.
  • Labor force participation:
    "The Rise and Fall of Labor Force Participation in the U.S." Speech, Washington, D.C.

    Reviews the existing economic literature on labor force participation in the U.S., and suggests that most movements in labor force participation can be explained with an appropriately rich empirical model emphasizing demographic factors. This suggests, in turn, that recent declines in the unemployment rate indicate genuine improvement in labor market conditions.
  • Monetary policy during 2008:
    "The Notorious Summer of 2008." Presentation, Rogers, Arkansas.

    Offers perspective on macroeconomic developments during 2008, stressing Fed easing during 2007-2008, unprecedented commodity price movements during the Spring of 2008, and real-time data indicating a modestly successful policy mitigating the financial crisis as of August 2008.
  • Asset purchases for the ECB:
    "Monetary Policy in a Low Rate Environment." Invited lecture, Frankfurt am Main, and invited lecture, London.

    Suggests that QE may be the best approach to monetary policy for the Euro-area when the policy rate is at zero and inflation is falling.
  • Unemployment targeting:
    "Some Unpleasant Implications for Unemployment Targeters." Presentation, New York.

    Cites research suggesting that "putting more weight" on unemployment when making monetary policy may be counterproductive.
  • Central bank independence:
    "The Global Battle Over Central Bank Independence." Presentation for AEA panel discussion, San Diego.

    Suggests the global consensus on central bank independence is weakening, and that the continued "fiscalization" of monetary policy will complicate monetary policy choices substantially in the future.
  • Measuring the stance of monetary policy:
    "Shadow Interest Rates and the Stance of U.S. Monetary Policy." Presentation at Washington University in St. Louis.

    Cites research suggesting that the "shadow federal funds rate" may provide an important gauge of the stance of monetary policy when the policy rate is near zero.
  • Nominal GDP targeting and price level targeting:
    "A Singular Achievement of Recent Monetary Policy." Invited lecture, Notre Dame.

    "Price Level Targeting: The Fed Has It About Right." Presentation, Memphis.

    Presents evidence that the Fed has behaved approximately like a price-level targeting central bank since the mid-1990s, and suggests that there would be little or nothing to gain from a switch to price level targeting or nominal GDP targeting.
  • The European sovereign debt crisis:
    "The Global Economy and the European Sovereign Debt Crisis." Invited lecture, London.

    Discusses a solution to the European sovereign debt crisis involving a grand bargain along the lines suggested by Thomas J. Sargent.
  • Dual versus single mandate for monetary policy:
    "Hawks, Doves, Bubbles, and Inflation Targets." Invited lecture, Utah State University.

    Shows why achieving price stability can be viewed as completely consistent with achieving full employment in the context of a leading model of the macroeconomy with monetary policy.
  • Global output gaps:
    "Global Output Gaps: Wave of the Future?" Presentation, Beijing.

    Discusses some recent literature on global output gaps and the relation to U.S. monetary policy.
  • Lower potential output in the U.S.:
    "Inflation Targeting in the U.S.A." Speech, Chicago.

    "Views on the U.S. Economy: A Four-Part Story." Presentation, Jackson Hole. (See Part IV).

    Argues that it is unrealistic to think of U.S. potential output as a trend line from the Q4 2007 level of GDP, since that level of output was part of the housing bubble.
  • Effectiveness of QE:
    "QE2: An Assessment." Presentation at the Quantitative Easing Conference, St. Louis.

    "QE2 in Five Easy Pieces." Presentation, New York.

    Argues that QE2 was quite effective in terms of the financial market signature associated with the implementation of the program.
  • Fiscal versus monetary policy:
    "Death of a Theory." Speech, Chicago.

    Cites and evaluates recent New Keynesian literature to argue that stabilization policy conducted by the fiscal authority is unlikely to be effective.
  • Measuring inflation:
    "Measuring Inflation: The Core is Rotten." Speech, New York.

    Argues that headline inflation provides the most appropriate metric for measuring inflation in the U.S., and that traditional arguments in favor of core inflation are much weaker than commonly appreciated.
  • Permanent zero nominal interest rates:
    "Reducing Deflationary Risk in the U.S." Presentation, Marseille.

    "The Seven Faces of 'The Peril.'" Research paper.

    Cites research on liquidity traps to argue that promises to keep the policy rate at zero can be counterproductive, and argues that quantitative easing provides the best hope for avoiding the Japan-like deflationary steady state.
  • The state of research in macroeconomics:
    "Research in Macroeconomics after the Crisis." Presentation, George Washington University.

    Suggests that the U.S. needs to upgrade its macroeconomic research program substantially.
  • Financial crisis:
    "Systemic Risk and the Financial Crisis: A Primer." Research paper.

    Provides an overview of systemic risk in the context of the event of 2007-2008.
  • Changing macroeconomic landscape:
    "Three Funerals and a Wedding." Speech, Evansville.

    Cites three popular ideas in macroeconomics on the decline due to the financial crisis, and one previously unpopular idea on the rise.