Federal Reserve Vice Chair Richard Clarida discusses the U.S. economy at a virtual event hosted by the Peterson Institute for International Economics.

Richard H. Clarida, vice chair of the Board of Governors of the Federal Reserve System, will make a webcast presentation on the US economic outlook and monetary policy followed by a discussion with PIIE president Adam Posen.

Many months after COVID-19 vaccines were first authorized for public use, still limited supplies could only partially reduce the devastating loss of life and economic costs caused by the pandemic. Could additional vaccine doses have been manufactured more quickly some other way? Would alternative policy choices have made a difference? This paper provides a simple analytical framework through which to view the contours of the vaccine value chain. It then creates a new database that maps the COVID-19 vaccines of Pfizer/BioNTech, Moderna, AstraZeneca/Oxford, Johnson & Johnson, Novavax, and CureVac to the product- and location-specific manufacturing supply chains that emerged in 2020 and 2021. It describes the choppy process through which dozens of other companies at nearly 100 geographically distributed facilities came together to scale up global manufacturing. The paper catalogues major pandemic policy initiatives—such as the United States' Operation Warp Speed—that are...

Too much blood in terms of unemployment and sweat in terms of intellectual effort has been spent on trying to determine the amount of fiscal space that economies have – our policy focus instead should be on what to do with the fiscal space that almost all advanced economies (and a surprising number of emerging market economies) actually have.

This realization begins with the failings of making misleadingly precise guesses about the output gap and various other not directly observable measures as a driver of policies within the state. Starting with Posen (1998, 2001) on restoring Japan’s economic growth, there has been a mounting attack on official sector output gaps being biased downwards by repeatedly estimating recession outcomes as the trend. Also, building on this analysis of Japan in the 1990s versus 2000s, and subsequent experience globally, has been opposition to the idea that fiscal austerity or even just fiscal inaction are the right responses to a...

With the American Rescue Plan, the US government has put in place a fiscal stimulus package worth 10% of GDP, to be followed by an equally large infrastructure package. In the EU, although the fiscal policy response has also been unprecedented, it is much smaller. As the effects of the pandemic on society and the economy are still fluid, economists and policymakers weigh their options and attempt to learn from previous recessions while looking forward to creating a coordinated response to the pandemic and beyond. On 3 June 2021, as part of the Centre for European Policy Studies’ annual flagship conference, the CEPS Ideas Lab, Intereconomics and the European Network for Economic and Fiscal Policy Research (EconPol) asked experts from both sides of the Atlantic to offer their insights on the potential lessons that could be learned for Europe. What are the effects for fiscal policymaking in Europe? Does Europe need a new fiscal framework? What does the EU have to learn...

Too much blood in terms of unemployment and sweat in terms of intellectual effort has been spent on trying to determine the amount of fiscal space that economies have – our policy focus instead should be on what to do with the fiscal space that almost all advanced economies (and a surprising number of emerging market economies) actually have.

This realization begins with the failings of making misleadingly precise guesses about the output gap and various other not directly observable measures as a driver of policies within the state. Starting with Posen (1998, 2001) on restoring Japan’s economic growth, there has been a mounting attack on official sector output gaps being biased downwards by repeatedly estimating recession outcomes as the trend. Also, building on this analysis of Japan in the 1990s versus 2000s, and subsequent experience globally, has been opposition to the idea that fiscal austerity or even just fiscal inaction are the right responses to a...

The uncertainty principle in quantum mechanics (also known as Heisenberg’s uncertainty principle) states that you cannot predict, with perfect accuracy, both the position and momentum of a particle. In economics, we realise that we can predict the values of two macroeconomic indicators, the output gap and the fiscal stance, with only limited accuracy. We cannot estimate both indicators without taking into account the other parameter’s estimate. While the United States has recently used a huge fiscal stimulus to considerably increase GDP as well as potential output, Europe after the financial crisis learned how austerity not only reduced current GDP, but also potential GDP and so-called structural fiscal balances, contrary to the intention of the European fiscal rules.

One issue of simultaneous estimations of the output gap and of the “structural” fiscal indicator is endogeneity, in particular endogeneity of the output gap (or estimated potential output). While a...