Working Paper: NBER ID: w17836
Authors: Laurence M. Ball
Abstract: From 2000 to 2003, when Ben Bernanke was a professor and then a Fed Governor, he wrote extensively about monetary policy at the zero bound on interest rates. He advocated aggressive stimulus policies, such as a money-financed tax cut and an inflation target of 3-4%. Yet, since U.S. interest rates hit zero in 2008, the Fed under Chairman Bernanke has taken more cautious actions. This paper asks when and why Bernanke changed his mind about zero-bound policy. The answer, at one level, is that he was influenced by analysis from the Fed staff that was presented at the FOMC meeting of June 2003. This answer raises another question: why did the staff's views influence Bernanke so strongly? I seek answers to this question in the social psychology literature on group decision-making.
Keywords: No keywords provided
JEL Codes: E52; E58; E65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Bernanke's prior advocacy for aggressive stimulus policies (E65) | Bernanke's subsequent cautious actions as Fed Chair (E58) |
| Fed staff's analysis presented at the June 2003 FOMC meeting (E52) | Bernanke's change in views (E58) |
| Bernanke's acceptance of Reinhart's recommendations (E58) | Bernanke's adoption of a more cautious approach (E63) |
| Group dynamics within the FOMC (D70) | Bernanke's change in policy (E52) |
| Bernanke's personality traits (E70) | Bernanke's decision-making process (E58) |