Richard Thaler: Yellen Is Doing a Pretty Good Job

The video discusses the behavior of firms, particularly in Silicon Valley, that are hoarding cash due to fear and lack of investment opportunities. It explores the impact of central bank policies, such as low interest rates, on these firms' decisions. The video also delves into the concept of forward guidance from a behavioral economics perspective, highlighting the importance of speeches by figures like Janet Yellen and the need for more research in this area.

Why are firms in Silicon Valley holding onto large amounts of cash?

• They are required by law to hold cash reserves.

• They are planning to invest in real estate.

• They are fearful and find current investment opportunities unattractive.

• They are waiting for interest rates to rise.

What is one reason firms might avoid making acquisitions in a low interest rate environment?

• Government regulations prevent acquisitions.

• They prefer to invest in foreign markets.

• There are no firms available for acquisition.

• High asset prices make acquisitions less attractive.

How do standard economists view the concept of forward guidance?

• As an example of 'cheap talk' with little impact.

• As a crucial tool for economic stability.

• As a method to increase inflation.

• As a way to directly control stock prices.

What is the main challenge in understanding the impact of central bank speeches?

• Difficulty in predicting interest rate changes.

• Complexity of financial markets.

• Inability to measure speech impact on inflation.

• Lack of research and analysis in this area.

What is predicted to happen in the next five years regarding central bank communications?

• A focus on international economic policies.

• A decrease in the number of speeches given.

• A shift towards more aggressive interest rate policies.

• A stream of research papers analyzing their impact.