Jackson Hole symposium: Navigating economic challenges
Since the debut in 1978, each of the Federal Reserve Bank of Kansas City’s Economic Policy Symposiums has been unique, but typically for the rich, thought-provoking content.
The 44th symposium, which took place Aug. 27-28, may be remembered as much for its content as for being the first presented virtually—live-streamed on YouTube rather than in Jackson Hole, Wyoming—an effect of the COVID-19 pandemic.
Papers presented remotely by authors and rounds of commentary and discussion were available live and gave the public a real-time, front-row seat for the first time.
The 2020 symposium topic, “Navigating the Decade Ahead: Implications for Monetary Policy,” examined issues policymakers are expected to face in the years to come. Overall, the symposium looked at how the near-term outlook for the global economy has been changed by the COVID-19 pandemic and the effectiveness of monetary and fiscal policy actions that preceded the outbreak. Each year, the Kansas City Fed’s Economic Research staff develops the topic and agenda in consultation with Bank President Esther George, who is the host of the symposium. The 2020 symposium included 15 presenters and discussants who shared in-depth research and commentary. Registered attendees represented 46 countries.
George kicked off symposium events with a series of morning interviews with national media outlets, in which she discussed expectations for the symposium, COVID-19's impact on the Tenth District economy, and her outlook for the U.S. economy.
Federal Reserve Chair Jerome H. Powell provided the opening address for the program, in which he said the Fed likely will let inflation rise above its 2 percent longer-run objective, a shift in policy that is expected to support the labor market and the overall economy.
Individual sessions over two days covered a variety of subjects:
- Business dynamism, an ongoing process of new firms forming, growing, shrinking and dying—a fundamental source of aggregate productivity growth in a healthy economy—has been slowing in the United States since the 1980s, and more sharply since the 2000s.
- The greater effect of the COVID-19 pandemic could be changes in long-term behavior, a scarring of beliefs that may have costs to the economy many times higher than short-run losses in output. This suggests that, even if a vaccine cures everyone in a year, the COVID-19 crisis will leave its mark on the U.S. economy for many years to come.
- High levels of economic uncertainty exacerbated conditions early in the pandemic and are slowing the recovery. Conditions, including a need for a massive reallocation of resources as COVID-19 permanently reshapes the economy, lower hiring by firms amid a rise in working from home and medical uncertainty about the extent and duration of the pandemic, are headwinds to a rapid recovery.
- The ways individuals, households and firms interpret information about inflation and how that information is provided often affects their actions. Supply-side interpretations (such as “inflation is bad for the economy”) lead to negative income effects, which can depress economic activity. Households and many firms in advanced economies typically have a supply-side interpretation. New communication strategies may help avoid public misinterpretation of policy decisions.