Abstract

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We use the televised congressional testimony of Alan Greenspan as a primary document in the understanding of a central bank's function in large open economies. The practice of monetary policy and applied macroeconomic forecasting is often likened to an art as much as a science. While decisions are data-driven, insight frequently relies more on history and experience than advanced statistical modeling. However, instruction in macroeconomics still takes a formula-driven approach in which history is subsumed into linear relationships whose robustness is critically lacking. We propose an alternative approach to understanding the role of a central bank by directly evaluating the statements of the leader of the US Federal Reserve during one of the most robust and stable periods of growth in the world's history--with the benefit of hindsight that all was perhaps not as it seemed. This is made possible due to a quirk in the history of cable television, which created C-SPAN, possibly the world's least interesting cable news station ever. This short talk will involve watching video clips from a July, 1997 hearing and will cover the main goals of a central bank, the case for positive but stable inflation, the role of skepticism in philosophy and the source of America's bizarre obsession with denigrating socialism.

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