On this episode of the Capitalisn’t podcast, Chicago Booth’s Raghuram G. Rajan joins hosts Bethany McLean and Luigi Zingales to explore risks in the financial system and possible solutions. Rajan discusses a paper he presented at the US Federal Reserve’s Jackson Hole conference in 2022, in which he and his coauthor argue that the Fed’s liquidity provision left the financial sector more sensitive to shocks, and suggest that the expansion and shrinkage of central bank balance sheets involves tradeoffs between monetary policy and financial stability. Together with Bethany and Luigi, Rajan discusses the path forward on inflation, given economic and political pressures, and his recommendations on how to manage risks and tradeoffs.

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