Pages

 

A Big Endorsement of NGDP Targeting

0 comments
Somehow I missed this, but last week the legendary Samuel Brittan made the case for NGDP targeting in his weekly Financial Times column (hat tip The Money Demand). I couldn't have asked for better timing given my recent post making the same argument. Among other things, he says one of the big obstacles to a wider acceptance of a NGDP targeting rule is its name. He thinks a better marketing approach would be to call NGDP targeting a national cash objective. So instead of saying the Fed should "target NGDP" he would have us say the Fed should "maintain the growth of cash spending" at a some target rate. I find this interesting since I have always preferred to use terms like "stabilizing nominal spending" rather than "stabilizing NGDP." What he is suggesting, though, is to go one step further and replace the technical word "nominal" with the user-friendly word "cash." I think he is on to something here.

I suspect, however, that it will take more than just a reframing of NGDP targeting for it to become adopted by monetary authorities. What is needed is a broad-based reconsideration of this approach from academics, economic bloggers, journalists, and policymakers. We are off to a good start with folks like Scott Sumner and Samuel Brittan making the case. It would be great to have their efforts followed with a spat of papers evaluating this crisis from such a perspective. Maybe we could even get folks like Bennet McCallum, Greg Mankiw, Robert Hall, Menzie Chinn, Jeffrey Frankel, Evan Koenig, and Dennis Jansen who have carried the NGDP targeting banner before to rejoin the fight. In the meantime I will keep blogging about it.

0 comments:

Post a Comment

  • Greenspan's Cult of Personality... Review topics and articles of economics: Alan Greenspan was a legend in his time and there was no shortage of praise for him back then. For example, who can forget Bob Woodow's 2000 book Maestro: Greenspan's...
  • Yes Tyler, Low Interest Rates Matte... Tyler Cowen is wondering whether the Fed's low interest rates in the early-to-mid 2000s really were that important to the credit and housing boom of the early-to-mid...
  • The Eurozone Crisis: Deja Vu... Review topics and articles of economics: Randal Forsyth sees similarities between the current unfolding of the Eurozone crisis and that of the U.S. financial crisis a few years back:Just as the problem on this...
  • Charles Plosser and the Burden of F... The Economist's Free Exchange blog is shocked to hear this from Federal Reserve Bank of Philadelphia President Charles Plosser:"Since expectations play an important role...
  • Arnold Kling and Expected Inflation... Review topics and articles of economics: What do we know about expected inflation? According to Arnold Kling not much if we look to financial markets:I'm also not convinced that we can read expected inflation...
  • A Paper on Stabilizing Nominal Spen... Given the recent discussion on stabilizing nominal spending as a policy goal I found this article by Evan F. Koenig of the Dallas Fed to be interesting: The article...
  • Why The Low Interest Rates Mattered... Review topics and articles of economics: This is the second of two posts detailing why the Fed's low interest rate policies in the early-to-mid 2000s was one of the more important contributors to the credit and...
  • Why The Low Interest Rates Mattered... This is the first of a two-part follow up to my previous post, where I argued that the Fed's low interest rate policy was a key contributor to the credit and housing...
  • The Stance of Monetary Policy Via t... Review topics and articles of economics: There has been some interesting conversations on the stance of monetary policy in the past few days between Arnold Kling, Scott Sumner, and Josh Hendrickson. Part of...
  • Scott Sumner's New Best Friend:... Joseph Gagnon is calling for $6 trillion more in global monetary easing. This should not be too hard to implement since the Fed is a monetary superpower.Update: The...
 
Review topics and articles of economics © 2011 A Big Endorsement of NGDP Targeting