Customize Consent Preferences

We use cookies to help you navigate efficiently and perform certain functions. You will find detailed information about all cookies under each consent category below.

The cookies that are categorized as "Necessary" are stored on your browser as they are essential for enabling the basic functionalities of the site. ... 

Always Active

Necessary cookies are required to enable the basic features of this site, such as providing secure log-in or adjusting your consent preferences. These cookies do not store any personally identifiable data.

No cookies to display.

Functional cookies help perform certain functionalities like sharing the content of the website on social media platforms, collecting feedback, and other third-party features.

No cookies to display.

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics such as the number of visitors, bounce rate, traffic source, etc.

No cookies to display.

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

No cookies to display.

Advertisement cookies are used to provide visitors with customized advertisements based on the pages you visited previously and to analyze the effectiveness of the ad campaigns.

No cookies to display.

Loading...
Most Recent Stories

Woodford on the Fed Decision….

Michael Woodford, who made waves with his big Jackson Hole paper, has a great interview in this morning’s Washington Post.  He busts a few myths (like the one that he endorsed NGDP targeting or said it was the optimal approach – in fact he says exactly the opposite) and elaborates on why he thinks Bernanke didn’t go far enough.  Some highlights:

“Michael Woodford: I’ve been writing about ideas closely related to that for quite a while. I didn’t specifically prefer to use that formalism of a nominal GDP target, which is why I’m not particularly associated with that specific proposal.”

…The thing about the Jackson Hole talk this year is that probably the most practical version of such a proposal that you can imagine the Fed adopting is an NGDP target. That is a compromise relative to the theoretical ideal.

…DM: One big advocate of an NGDP target, on his blog and elsewhere, has been Scott Sumner at Bentley University. Did he influence your thinking on this?

MW: I don’t think it affected me.

…I think those are big problems with vague formulations and I think there are important advantages to a more quantitative target but it’s always true that you’re always facing a tradeoff. You have to choose somewhere between not being vaguer than you have to be, but not being specific in a way that is specific and precise but wrong. I personally would have gone further but I think what they did is definitely a step in the right direction and I could certainly understand the conditions that would have lead them to not put numeric measures in it.

No mention of fiscal policy, which is interesting.  I would have loved to hear more about his conclusion in the paper regarding the use of fiscal as a compliment to his idea of setting firm targets.  It’s very very similar to MR Co-Founder Mike Sankowski’s TC Rule which would set a target for unemployment by adjusting the size of the deficit….That’s the real bazooka here.  Bernanke’s running around with a fun grenade launcher.  Mike’s got the bazooka in a case in his basement and no one knows it’s there because this sort of policy idea has gained zero traction except in some small heterodox econ circles….

 

Comments are closed.