US post-COVID Economic Recovery and the Fed's Monetary Policy Mistakes

This paper argues that the persistent inflation in the U.S. during the post-COVID economic recovery was mainly the result of the Fed's policy mistake caused by an overestimation of the negative output gap. The paper shows that after a two-quarter contraction, the U.S. economy quickly rebounded and outpaced its potential output, thus remaining in overheating territory. However, policymakers prolonged the monetary expansion beyond the necessary, which contributed to fuel inflation for a more prolonged time. The policy mistake was the result of an inaccurate estimation of potential output. Based on an alternative estimation that uses full employment as a condition, this paper shows that the U.S. economy has been running with a positive output gap since mid-2021. The results illustrate that the Federal Reserve was well-behind the curve in an economy in overexpansion and with a galloping inflation escalating well-above the target.

Reserve system design for allocation of scarce medical resources in a pandemic: some perspectives from the field

Reserve systems are a tool to allocate scarce resources when stakeholders do not have a single objective. This paper introduces some basic concepts about reserve systems for pandemic medical resource allocation. At the onset of the Covid-19 pandemic, we proposed that reserve systems can help practitioners arrive at compromises between competing stakeholders. More than a dozen states and local jurisdictions adopted reserve systems in initial phases of vaccine distribution. We highlight several design issues arising in some of these implementations. We also offer suggestions about ways practitioners can take advantage of the flexibility offered by reserve systems.

The Law of Monetary Finance under Unconventional Monetary Policy

Monetary finance (money creation by central banks to fund public expenditure) is a high-profile part of economic, political and policy debates concerning the legitimacy of central banks in liberal economies and democracies. This article makes a distinctively legal contribution to those debates by analysing the legal frameworks governing monetary finance in three prominent central banking systems between 2008 and 2020: the Federal Reserve System, the Eurosystem and the Bank of England. It begins by explaining the law governing central bank and national treasury relations in the United States, the EU and the UK. It then examines how that law operated under the unconventional monetary policies adopted by central banks in response to the financial crisis and the COVID-19 pandemic. The article concludes by reflecting on the challenges monetary finance presents to the sui generis position of central banks in the liberal constitutional order.