President Bush has nominated Ben Bernanke to be the next Chairperson of the Federal Reserve. Story here. Tyler Cowen offers some reasons to believe this is a good choice. I agree. Bernanke's book on the Great Depression is a must read for anyone who wants to understanding the international aspects of the Depression. His paper supporting endogenous economic growth models over variants of the exogenous growth models contains some important lessons for development economists. Here is the abstract:
Is long-run economic growth exogenous? To address this question, we show that the empirical framework of Mankiw, Romer, and Weil (1992) can be extended to test any growth model that admits a balanced growth path; and we use that framework both to revisit variants of the Solow growth model and to evaluate simple alternative models of endogenous growth. To allow for the possibility that economies in our sample are not on their balanced growth paths, we also study the cross-sectional behavior of TFP growth, which we estimate using alternative measures of labor’s share. Our broad conclusion, based on both model estimation and growth accounting, is that long-run growth is significantly correlated with behavioral variables such as the savings rate, and that this correlation is not easily explained by models in which growth is treated as the exogenous variable. Hence, future empirical studies should focus on models that exhibit endogenous growth.
