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On the natural rate and being always wrong

Summary:
So I saw that someone linked to an old post of mine in a discussion on Jared Bernstein's blog. The discussion is on productivity slowdown.In that post I quote Alan Blinder on his views (slightly more than a year ago) on the natural rate. He said : "the 'central tendencies' in the Federal Open Market Committee’s latest published forecasts range from 5.2% to 5.5% for the 'full-employment' unemployment rate, and from 2% to 2.3% for the potential GDP trend." So unemployment should be below the natural rate now, and arguably that could be seen as a reason for the FOMC hike last month, although I doubt that Yellen thinks we're at full employment. As I note on that post Blinder was wrong in the 1990s too about the potential GDP trend. I don't expect any surge in inflation any time soon. But it is amazing how serious economists can be wrong almost all the time.

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So I saw that someone linked to an old post of mine in a discussion on Jared Bernstein's blog. The discussion is on productivity slowdown.

In that post I quote Alan Blinder on his views (slightly more than a year ago) on the natural rate. He said :

"the 'central tendencies' in the Federal Open Market Committee’s latest published forecasts range from 5.2% to 5.5% for the 'full-employment' unemployment rate, and from 2% to 2.3% for the potential GDP trend."

So unemployment should be below the natural rate now, and arguably that could be seen as a reason for the FOMC hike last month, although I doubt that Yellen thinks we're at full employment. As I note on that post Blinder was wrong in the 1990s too about the potential GDP trend. I don't expect any surge in inflation any time soon. But it is amazing how serious economists can be wrong almost all the time.
Matias Vernengo
Econ Prof at @BucknellU Co-editor of ROKE & Co-Editor in Chief of the New Palgrave Dictionary of Economics

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