Plosser to the Fed
The Federal Reserve Bank of Philadelphia on Tuesday named Charles Plosser as its new president, effective August 1, bringing a policy hawk and inflation-targeting advocate to the Bernanke Fed.This is, I believe, the highest-ranking policy position ever held by an advocate of the "real business cycle" school of macroeconomics. According to these theories, monetary policy can affect nominal variables such as inflation but is powerless to affect real variables such as production and employment. Some years ago, Charlie and I sparred over these theories in a Journal of Economic Perspectives Symposium, available through JSTOR here and here.
If I thought Charlie took these theories so seriously that he would rely on them as a guide to policy, I would be worried. However, I am not. Charlie is smart and sensible, and he will take the theories he has advanced with the requisite grain or two of salt.