A new working paper stated that the U.S. economy could witness “substantial negative impacts” on real GDP, unemployment, and inflation in 2023 and 2024 based on previous monetary shocks since 1946.
The National Bureau of Economic Research (NBER) recently published a paper co-authored by the University of California, Berkeley’s Christina and David Romer, titled “Does Monetary Policy Matter? The Narrative Approach After 35 Years.”
The economists examined the various post-war monetary shocks and assessed their effects on expanding and contracting conditions of the national economy.
Since the Second World War, the primary monetary shocks have been changes in the quantity of money traveling through the economy, adjustments to short-term interest rates, fluctuations in credit availability, and volatility in exchange rates. These instances can hurt the economy, such as interest-rate hikes resulting in falling employment or contracting output….