Macroeconomic Implications of Fiscal Imbalance

Chicago Booth Management Conference 2010

April 29, 2010

Moderator:

• Lars Peter Hansen, University of Chicago

Panelists:

• Steven J. Davis, University of Chicago Booth
• Edward P. Lazear, Stanford University
• Harald Uhlig, University of Chicago
• Martin Eichenbaum, Northwestern University

The Milton Friedman Institute sponsored a panel on the timely topic of deficits and their long-term consequences at Chicago Booth's annual Management Conference. MFI direct Lars Peter Hansen moderated a wide-ranging discussion on the implications for macroeconomic growth prospects, for the conduct of monetary policy, and for inflation.

The panel explored these questions:

• Market signals suggest that long-term inflation is not much of a concern. Do investors have it right?
• Policy uncertainty challenges economists who study fiscal imbalance and private sector investors concerned about the future of the macroeconomy. Is this a problem with major quantitative implications, or one of little concern?
• How informative is academic research in enhancing our understanding of the macroeconomic consequences of fiscal imbalance? What are some of the most important insights?
• The CBO projects the fiscal consequences of proposed legislation, including, for instance, the recent health care bill. How reliable have these forecasts been? Are they to be trusted in public discourse?

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