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BPEA Article

Editor’s Summary of the Brookings Papers on Economic Activity

David H. Romer and Justin Wolfers

Abstract

THE BROOKINGS PANEL ON ECONOMIC ACTIVITY held its
ninety-second conference in Washington, D.C., on September 15 and 16,
2011, as the nation fiercely debated the appropriate policy response to a
disappointing recovery from the Great Recession. The contributions to
this volume of the Brookings Papers provide new insights into macroeconomic
fluctuations and into government actions to promote employment
and growth.
The first three papers focus on the labor market. The first demonstrates
that unemployment is terribly costly, much more so than conventional models
imply. The second undertakes a thorough analysis of small businesses
and of their owners’ motivations, showing that, contrary to conventional
wisdom, these businesses do not drive either employment growth or innovation.
The third finds that the extensions in the duration of unemployment
insurance benefits enacted in response to the Great Recession are contributing
only a very small amount to unemployment.
The next two papers study monetary policy. The fourth paper analyzes
the various channels through which quantitative easing affects interest
rates,
finding that not just the magnitude but also the composition of the Federal
Reserve’s asset purchases is critical to their effects. The fifth paper discusses
practical monetary policy, focusing on the recent experiences of the
United States and Sweden.
This volume also marks an innovation in the Brookings Papers, in which
the authors of two previous studies revisit their earlier conclusions in light
of newly available data. Thus, the sixth paper returns to an earlier study of
the performance of the labor market during the Great Recession, and the
seventh paper reexamines the case for giving greater attention to an alternative
way of measuring GDP. Both papers confirm and extend the findings
of the earlier ones.

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