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We’ll have to wait for the 2011 minutes to know exactly what happened, but this paragraph sent to me by Marcus Nunes and also Stephen Kirchner (apparently from Justin Wolfers tweet), confirms what I thought after I heard Bernanke’s response to a reporter on NGDP targeting, back in 2011:

[Update: Marcus indicated it was Neil Irwin, Not Justin Wolfers who tweeted.]

At the time, I thought Bernanke probably had at least some sympathy for NGDP targeting. That’s partly based on the comments he made at the 2011 press conference, which was sort of along the lines of “very interesting idea, but in the end we stayed with IT” (but not those exact words!) and also based on the fact that he is one of the few academics who used to discuss NGDP in the context of monetary policy, which shows the basic idea has been on his mind for many years. It’s also an idea that tends to appeal to people outside the Fed who have Bernanke’s general views on monetary policy. Like me!

I still think that if Bernanke had been an academic during the Great Recession he would have supported NGDP, or at least been very sympathetic.

Of course once you join the Fed your freedom to maneuver is far less. Even I understand that the Fed would have looked crazy to suddenly adopt NGDPLT, just as they were finally settling on an explicit 2% inflation target. I’ve always thought of this as a 10 or 20 year struggle, and still believe that.

Still it’s good to know that the objections are not too serious. Over time the shift from IT to NGDPLT will look less opportunistic. Perhaps the shift could occur at a moment when NGDPLT would not lead to higher expected inflation. And it’s actually much easier to explain NGDPLT to the public than IT, which Fed officials would realize if they ever bothered to read my papers on NGDP targeting. (Try explaining to the public that you are trying to “raise their cost of living” for their own good, and be sure to use “Phillips Curves” in your explanation. Lots of luck!)

NGDP targeting is something that academic economists need to mull over for a while. Once a majority of academic economists favor NGDPLT, it will be much easier for the world’s central banks to switch over to the new policy.

PS. If you don’t agree with my take on Bernanke, read this post.

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This entry was posted on October 05th, 2015 and is filed under NGDP targeting. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or Trackback from your own site.



