David Wessel is the Director of the Hutchins Center on Fiscal and Monetary Policy at Brookings. You can sign up here to receive email updates about new Hutchins Center research and events.
Dr. Yellen, of course, is just finishing four years as chair of the Federal Reserve, the capstone to two decades of public service at the Fed and in the White House and an accomplished academic career.
Although many hoped that she’d get a second term as Fed chair, we at Brookings are very pleased to have her join our team. She will be sitting down the hall from other scholars in Brookings’s Economic Studies program, including her predecessor at the Fed, Ben Bernanke; former Fed vice-chair Don Kohn, and Nellie Liang, former director of the Fed’s division of financial stability.
When President Obama nominated Dr. Yellen in the Fall of 2013, I wrote in my Wall Street Journal column: Ben Bernanke wrote the first half of a new economics textbook: How to use monetary policy to prevent a Great Depression and avoid deflation after short-term interest rates hit zero. He took the Fed’s portfolio from $860 billion to $3.8 trillion and was adding to it by printing $85 billion a month to buy bonds and mortgage securities. Dr. Yellen, I said, would write the second half of the textbook: How to return monetary policy to something near normal without provoking the next financial crisis, even, it turns out, as elected politicians make a mess out of tax and spending policy. She would have to figure out when and how to stop increasing that portfolio and, someday, to let it shrink without tanking the economy.
Four and half years later, her record looks pretty darn good. The Fed has begun to shrink its portfolio and—very gradually—has raised interest rates without triggering unwelcome turmoil in financial markets or disrupting the economy’s recovery from the Great Recession. Unemployment was 6.7% when she was sworn in; today, it’s 4.1 Inflation remains shy of the Fed’s 2% target, but it is getting closer. (My former WSJ colleagues Greg Ip and Jon Hilsenrath and I recently looked back at her term as Fed chair in a short video: http://www.wsj.com/video/assessing-janet-yellen-term-as-fed-chair/1D3248DA-B5F1-42B9-AA50-BE15202714EE.html )
Both before and during her tenure at the Fed, Dr. Yellen’s interests have gone beyond macroeconomics, monetary policy and financial stability to the job market, wages, globalization and inequality. We’re looking forward to helping Dr. Yellen reflect on her impressive career, to working with her as she continues to advance the state of economic knowledge, and to benefitting from her advice as we work to improve the quality and effectiveness of fiscal and monetary policies and public understanding of them.