Michael Woodford is John Bates Clark Professor of Political Economy at Columbia University. He has been a MacArthur Fellow and a Guggenheim Fellow, and is a Fellow of the American Academy of Arts and Sciences, as well as a Fellow of the Econometric Society, a Research Associate of the National Bureau of Economic Research, and a Research Fellow of the Centre for Economic Policy Research. In 2007 he was awarded the Deutsche Bank Prize in Financial Economics. He is currently co-editor of the NBER Macroeconomics Annual, and on the editorial boards of Annual Reviews of Economics and American Economic Journal—Macroeconomics.
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A prolonged period of extremely low nominal interest rates has not resulted in high inflation. This has led to increased interest in the “Neo-Fisherian” proposition according to which low nominal interest rates may themselves cause inflation to be lower.
Revised text of a presentation at the Conference on Microfoundations for Modern Macroeconomics, Columbia University, November 2010. I would like to thank Amar Bhidé, Roman Frydman, and Andy Haldane for helpful comments, and the Institute for New Economic Thinking for research support.
John Kay’s thought-provoking essay The Map is Not the Territory: An Essay on the State of Economics argues that economists have been led astray by excessive reliance on formal models derived from assumptions that bear too little similarity to the world we live in.
The future of macro, he says, may well make “the formation and revision of expectations an object of analysis in its own right.”