Two economists who were ousted last fall at the Federal Reserve Bank of Minneapolis have been quietly reinstated.
Patrick Kehoe and Ellen McGrattan, the two high-profile research economists who left the Fed under a cloud of controversy last year, have been hired as consultants for the bank.
Kehoe, who was the bank’s highest-ranking research economist and a well-known figure in academic circles, was hired six months after he was fired in October. He is still working in the Economics Department at the University of Minnesota. McGrattan was hired as a consultant in January, soon after she started working full-time at the university.
McGrattan was the third-highest-ranked research economist at the Minneapolis Fed, behind only Kehoe and V.V. Chari, according to ratings published by the Federal Reserve Bank of St. Louis. The exits of Kehoe and McGrattan caused ripples in academic circles and led to a raft of coverage in the financial press.
The Minneapolis Fed has for decades had a reputation as one of the nation’s premier economic research institutions. Observers like Stephen Williamson, a former Minneapolis Fed economist who now works at the St. Louis Fed, interpreted Kehoe’s ouster and McGrattan’s exit last fall as an unwelcome change in direction that did damage to the bank’s reputation for research.
A spokesman for the bank declined to comment Monday on the reason for the rehirings, though Sam Schulhofer-Wohl, the Minneapolis Fed’s director of research, confirmed that Kehoe and McGrattan have been hired as consultants.
“We value our relationship with these individuals and the University of Minnesota more broadly,” Schulhofer-Wohl said in a statement.
Meanwhile, the bank’s former research director, Kei-Mu Yi, who was demoted and replaced by Schulhofer-Wohl in October, remains at the bank with the title of “special policy adviser to the president.”