This research was published on April 8th, 2022 in Fortune

With inflation stubbornly high and the war in Ukraine adding pressures, some are calling for a “Volcker shock” to insure against structurally high inflation. The Federal Reserve has no hope of delivering a soft landing, the argument goes, and should choke the economy into recession with shock treatment of very high interest rates, thereby wringing inflation from the system—much as then-chair Paul Volcker began to do with a surprise announcement one Saturday in October 1979.

Yet whether to take out such macroeconomic insurance—a recession is the price of eliminating the risk of inflation shifting structurally much higher—is a difficult call to make. Far from obvious, this requires calibration of that risk and of the cost of reducing it. It is also a question of when the right time would be to insure against such a structural break.