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Hot Air from Jackson Hole
The 2013 Jackson Hole symposium lacked the star power of earlier years with US Federal Reserve Chairman Ben Bernanke and European Central Bank President Mario Draghi keeping away. From the viewpoint of developing economies, the most relevant paper was presented by Helene Rey of the London Business School. She not only raised critical issues generally glossed over by neoclassical and monetarist economists, but also cautioned against the hegemonic role of the Fed.
This year, the air blowing from the annual symposium at Jackson Hole, Wyoming, was less hot. In recent years, the symposium had turned into a much-publicised, glittering affair with Alan Greenspan as the centrepiece. The 2005 symposium was on “The Greenspan Era” and the participants lavished praise in adoration of the maestro.1
Invariably, the “wise” men representing top officials of the western world’s central banks and a group of like-thinking economists used to sing in praise of the miracles performed by Greenspan. They would engage in an exhibition of exotic algorithms and econometric models, seeking to establish how monetary tools worked through their interface with transmission mechanisms and achieved their objectives. They created an impression that they were “masters of the universe” who defied the demon called inflation. Unfortunately, their universe collapsed in 2007 and, with the demise of Lehman Brothers in 2008, the process was complete. Sadly, many of them had not even anticipated the coming collapse and continued to sing in praise of the efficiency of financial markets. Since then, the efficacy of monetarist tools has been questioned and the Jackson Hole confabulations have lost their glitter.
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