Wow. At last. I've finally managed to listen to a lecture delivered by a Economics Nobel Laureate.
Yesterday, as part of the plenary session of the first day of the Tenth Annual Missouri Economics Conference, Finn Kydland (UC-Santa Barbara) delivered a lecture entitled "Nominal Anomalies." Kydland won the 2004 Nobel Prize in Economics with Edward Prescott (Arizona State) "for their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles." And boy, it was an honor and privilege to listen to him.
However, it's not just about being in the presence of a Nobel Laureate. Yesterday, it was also about the lecture that Dr. Kydland delivered. Basically he presented his latest research with Espen Henriksen (UC-Santa Barbara) and Roman Sustek (Iowa) on international business cycles. It is a continuation of their recent NBER publication where they document that, at business cycle frequencies, fluctuations in nominal variables, such as aggregate price levels and nominal interest rates, are much more synchronized across countries than fluctuations in real GDP. Well, given that domestic nominal variables are determined largely by domestic monetary policy, I can't help but think is this a reinforcement of the classical dichotomy? Mmm, something well worth discussing with my students...
But then again, Dr. Kydland hinted that it may not be that way. They use a parsimonious international business cycle model to account for this aspect of cross-country aggregate fluctuations. The reason: technology shock spill overs across countries. Because of these shocks, expected future responses of national central banks to fluctuations in domestic output and inflation generate movements in current prices and interest rates that turn out to be quite sychronized across countries even when output is not.
Still, according to Dr. Kydland, there are still some anomilies that exist in nominal data relative to the model, and he quickly went through this quickly at the latter part of his lecture because, unfortunately for us, he was running out of time. In a nutshell, most of these anomalies are in the forms of leads and lags in fluctuations as compared with what their basic model predicts.
Well, I'll be keeping track on where Dr. Kydland's research will lead to. As of now, I just want to savor the experience I got, again, being in the presence of a giant. I just hope there will be more giants coming in the way.