Tuesday, February 25, 2014

1960? 1947?

At MacroMania, in a post titled 2008, David Andolfatto writes:

And so, it was the Lehman-AIG event that brought all financial firms under heightened suspicion--and it was this event that drove the financial crisis from September 2008 and onwards.

We all know how the Fed reacted at the time, and since then. The interesting question here is what the Fed might have done differently in the time leading up to the start of the crisis in 2007 and beyond?

David adds, "It is important to answer this question, I think, in the context of policy making that is constrained to operate with the use real-time data (that is frequently subject to significant revisions as time unfolds)."

Fair enough. But let's not go back to the crisis of 2007, nor the few months before that crisis. Let's go back as far as we can -- as far back as we can trust the data.

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