‘Run it hot’: the risks and rewards of a new policy era
Covid-19 has added impetus to an emerging intellectual shift in policy-making. But central banks face unresolved issues
Covid-19 has shaken economics, much as the preceding crises throughout history upended the thinking of the time. From the start, the pandemic pushed economists into the frontiers of the subject, from the use of high-frequency data to track the economy, to the merging of epidemiology and macroeconomics. But the crisis may also have added impetus to a deeper intellectual shift in economics that predated the virus.
Emblematic of this shift is the US Federal Reserve’s decision to adopt average
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