Two top economists are
out at the Federal Reserve Bank of Minneapolisafter the pair “differed philosophically” from bank President Narayana Kocherlakota, the Star Tribune’s Adam Belz reports.
Patrick Kehoe, a faculty member at the University of Minnesota, was the bank’s top-ranked research economist. Ellen McGrattan, who joined the Minneapolis Fed in 1992 and was the bank’s third-ranked economist, will go on unpaid leave and take a position at “the U” as well.
The departure of the two star economists has “raised eyebrows” in the academic community, according to the report.
The Minneapolis Fed has long been seen as a stalwart of research, joining with the nearby university to foster an academic brain trust.
From the Star Tribune:
McGrattan said she does not know why Kocherlakota would fire Kehoe or let her leave — “It’s absolutely mysterious to us,” she said — but the circle of advisers to the president has shrunk since he arrived and she has been frozen out.
“The last time I talked to Narayana one on one was before he was the president [in 2009]” she said.
There are subtle policy differences between Kocherlakota and the economists who are leaving. Kocherlakota has been at the center of a debate over the effectiveness of the Fed’s low-interest-rate policy. He has pushed for nearly two years for the Fed to hold down rates until unemployment drops to 5.5 per cent.
Once considered a monetary policy “hawk,” Kocherlakota is one of the more dovish members of the Fed, advocating monetary stimulus and using accommodative phrases about how the central bank should do “whatever it takes” to reduce unemployment and juice the economy.
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