Eric J. Hanson Lecture Series welcomes macroeconomist Emi Nakamura

"Monetary and fiscal policy much more important since the Great Recession"

Donna McKinnon - 06 March 2017

Monetary policy influences the economy through its effect on interest rates. Traditionally, lower interest rates make it less expensive for the public sector and consumers to borrow, which stimulates spending. However, a cut in interest rates may also signal instability, spurring less spending and dampening economic growth. Emi Nakamura with the Columbia Business School calls this the "information effect" - and it is the subject of her upcoming lecture for the Institute for Public Economics and the Department of Economics' annual Eric J. Hanson Lecture Series on Thursday, March 9.

Nakamura's field of research includes monetary and fiscal policy, business cycles, finance, exchange rates and macroeconomic measurement. In 2014, the associate professor at Columbia Business School and Research Associate of the National Bureau of Economic Research was listed as one of the 25 most influential young economists by the International Monetary Fund.

Her 2017 lecture, "How do Macroeconomists Measure the Effects of Monetary and Fiscal Policy?" will be of interest to economists, but also to those who have their eye on the vagaries of the marketplace here in Canada and in the US.

"The big challenge in macroeconomics is that we don't have real 'experiments' with which to measure these effects," says Nakamura. "Governments tend to cut interest rates and do fiscal stimulus during recessions - [but] we have only limited scientific evidence on the effects of these policies. Which means that there is much more room for ideology - as opposed to science - in determining people's opinions on the right amount of government spending in a recession. I will discuss some ways macroeconomists try to get around these issues - and what we have learned from this research."

Nakamura says that the information effect - whereby expansionary monetary policy can actually signal pessimism - is potentially more important in an era in which the determinants of monetary policy are uncertain. "Monetary policy has gone to new frontiers since the Great Recession," she says. "Yet, measuring the effects of monetary policy remains extremely challenging. Much of monetary policy is about how the central bank responds systematically to variables like output and employment, but it is exactly when the central bank must deviate from this systematic behavior that the information effect has the potential to be strongest."

The Eric J. Hanson Lecture Series was established by friends and colleagues of Eric J. Hanson to commemorate his contributions to economics and public policy in Alberta. Hanson joined the Department of Political Economy at the University of Alberta in 1946, and was professor and head from 1957 to 1964 before it was divided into two entities: Economics and Political Science. Hanson went on to serve as associate dean of Graduate Studies from 1964 to 1967, then returned to full-time teaching until his retirement in 1974.

Hanson's career spanned all aspects of public finance, including education finance, health-care finance, federal-provincial relations, energy economics and the oil industry. He was also an important figure in the development of the social science disciplines in Alberta. Befitting a scholar whose influence is still seen in the economic policies of this province, the annual Hanson lecture series brings to the University of Alberta distinguished international economists who are addressing important public policy questions.

Emi Nakamura will be speaking at the 2017 Eric J. Hanson Lecture Series on Thursday, March 9, from 4 - 6 p.m. in Humanities L-1.