CFS Director of Advances in Monetary and Financial Measurement (AMFM) Professor William A. Barnett delivered the keynote lecture “Is the BREXIT Bifurcation Causing Chaos in the United Kingdom?”
Bill’s remarks explore:
- Why is Brexit changing economic risk without a source of external shocks?
- Mathematical properties of chaos with relevance to BREXIT and U.S. monetary policy.
- Why chaos is not necessarily bad. It is normal in nature (weather, climate, etc.) and is relevant to science and economics. Chaos contains useful information.
- The United Kingdom and United States economies have undergone significant structural and policy changes in the past decades rendering chaotic dynamics more relevant.
- Meaningful policy implications stem from the existence of Shilnikov Chaos.
- Shilnikov chaos, produced by interest rate feedback policy with sticky prices, explains the downward drift of interest rates over the past 20 years.
- Interest rate feedback policy rules need to be augmented by simultaneous use of a second policy instrument focused on the long run to avoid unintentional downward drift of interest rates to their lower bound.