Larry Summers has withdrawn his name from nomination as the Fed Chairman. I have argued that there would be little difference in policy between him or Janet Yellen. The Fed balance sheet problem would still exist and the dependence on Fed guidance or communication will still be the main focus of policy.
Summers would clearly have been more focused on international issue while Yellen would have had a domestic focus. Yellen may be more dovish because of her focus on employment issues. However, the real problem is that monetary policy cannot solve the structural unemeployemnt issues or the growth problem casued by ineffective or inefficient regulation. She is unlikely to force a discussion on these issues.
Yellen has a strong history at the Fed and would be a good choice for Fed chairman. Any other choice would create too much uncertainty; however, none of the current policy risks would chnage. There still will be no solution to the blance sheet unwind or tapewr problem and there will still be the issue of what will be the forward guidance as we get close to a turning point.
Summers would clearly have been more focused on international issue while Yellen would have had a domestic focus. Yellen may be more dovish because of her focus on employment issues. However, the real problem is that monetary policy cannot solve the structural unemeployemnt issues or the growth problem casued by ineffective or inefficient regulation. She is unlikely to force a discussion on these issues.
Yellen has a strong history at the Fed and would be a good choice for Fed chairman. Any other choice would create too much uncertainty; however, none of the current policy risks would chnage. There still will be no solution to the blance sheet unwind or tapewr problem and there will still be the issue of what will be the forward guidance as we get close to a turning point.
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