The theory that expectations are a key driver of price increases will be tested in 2022.

“One thing we certainly learned from history is that once you adjust people’s expectations, they can become quite entrenched, and so it’s difficult to adjust back in the opposite direction,” says Emi Nakamura, an economics professor at the University of California at Berkeley.

Clark medalist Emi Nakamura says this unusual feature of the Covid downturn could make a big difference when restrictions on spending go away.

Emi Nakamura, an economics professor at the University of California at Berkeley, was awarded the John Bates Clark Medal last year. The American Economic Association gives the medal annually to the “American economist under the age of 40 who is judged to have made the most significant contribution to economic thought and knowledge.” Nakamura’s work focuses on macroeconomic policy and business cycles, deploying novel datasets and empirical techniques to reexamine long-standing assumptions that have undergirded mainstream economic models for decades. Nakamura spoke with Bloomberg Markets in late August about how this perspective has become increasingly relevant as the pandemic has forced policymakers to throw out their old playbooks.

If the Fed is forced to cool an overheating economy, there are only painful choices.

Treasury Secretary Janet Yellen caused some consternation last week when she raised the possibility that “interest rates will have to rise somewhat to make sure our economy doesn’t overheat.”

Higher corporate rates may have a big impact. Investors should start preparing.

Four years ago, corporate tax reform was on the agenda, but few took it seriously. What happened next? Tax reform did come through by the end of the year, under President Donald Trump

To stave off runaway price hikes, the country needs to be reassured that the Federal Reserve still has its hand on the leash.

Inflation is low. So are interest rates. More than $3 trillion of Covid-19 relief spending in 2020 apparently had no negative macroeconomic consequences.

Noah Smith

Long ago, people thought the business cycle was akin to a natural event, like the phases of the moon. That has since been disproven, but there are a number of other competing hypotheses.

The John Clark Bates Medal almost never goes to a macroeconomist. Emi Nakamura is a worthy exception.

By Noah Smith

May 2, 2019, 12:27 AM GMT+5:30 Corrected May 2, 2019, 3:13 AM GMT+5:30