Macroeconomic Principles and Monetary Policy

Abstract

It’s a great pleasure and honor for me to be invited to participate in this Forum, although I have to tell you that I was more than a little intimidated when I learned that I would be part of a panel featuring Bob King and Tom Sargent. I take some comfort, however, from what Mike Dotsey told me when he first contacted me about this program seven or eight months ago. He said the panel would focus on optimal monetary policy, but he wasn’t expecting me to provide a highly technical analysis, or even a low-tech analysis. Instead, he wanted me to talk about how I, as one fairly senior Fed monetary policymaker, use economic analysis and principles to arrive at policy positions and then present and defend them. This I think I can do, although I still feel a little uneasy with Bob and Tom so close at hand. The first thing I need to say is that I do try to base my policy positions on solid economic analyses, as do my FOMC colleagues. And throughout my 11-year tenure as Richmond Fed president I’ve been blessed with exceptional policy advisors and a strong research staff who’ve made this possible. My principal policy advisor, Marvin Goodfriend, is well known to all of you, I’m sure. Our research director, Jeff Lacker, Bob Hetzel, and several other members of our staff provide strong support. Mike Dotsey was an important part of our policy team before the Philadelphia Fed got lucky and he moved up here. Finally, we’ve developed long-term advisory relationships with several leading university economists, most notably, Bob King and Ben McCallum. All of these people have helped keep me reasonably abreast of ongoing research in monetary economics, and, appropriately, they’ve insisted—some This article is the text of an address given by J. Alfred Broaddus, Jr., president of the