Pages

Monday, November 12, 2012

John Taylor Tips His Hat To NGDP Targeting

John Taylor gave a recent talk at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Milton Friedman Centennial Celebration where he made some interesting points.  He makes cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 case that that monetary policy has been unpredictable and ad-hoc over cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 past few years, including some periods where monetary policy was too tight.  As a result, he believes a more systematic, rule-based approach to monetary policy would be beneficial to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 recovery.  To this end, he tips his hat toward nominal GDP targeting in his discussion of what he thinks Milton Friedman would endorse:
Anocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r question raised during cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 discussion at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 centennial conference is “what about nominal GDP targeting?” In my view, Milton Friedman would have been positive about a proposal to keep nominal GDP growth stable, but would have wanted also to have a specific rule for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 instruments of policy to achieve that target.
I agree. Friedman in this 2003 WSJ article indicates he might have liked a nominal GDP level target. As Michael Woodford notes, nominal GDP targeting can be thought as cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 heir to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Friedman monetary target rule once one acknowledges that velocity is not stable. The predictability, transparency, and certainty this rule would create would also make it appealing to Milton Friedman.  Here is how I explained this point before:
So yes, Milton Friedman did call for buying longer-term securities until a robust recovery takes hold... I suspect, however, that Friedman would have preferred that such a monetary stimulus program be done in a more systematic manner than that of announcing successive, politically costly rounds of QE.  Imagine how much easier all of this would have been had cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Fed announced a level target from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 start and said asset purchases will continue until cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 level target was hit.  There would have been no need to announce cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 large dollar size of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 asset purchases up front that attracts so much criticism.  There would also have been no need to announce successive rounds of QE that make it appear cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 previous rounds did not work.  More importantly, it would have more firmly shaped nominal expectations in a manner conducive to economic recovery.  The question is what type of level target would Friedman have supported? 
I think cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 answer is clear.

3 comments:

  1. I was cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 student who asked cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 question Taylor refers to, about NGDP targeting! To be frank, I was surprised by Taylor's receptivity to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 idea (though he argued cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 rule should be stated in terms of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 instrument, racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r than in terms of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 goal variable), since I consider him cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 archetypal neo-Keynesian, stuck thinking solely within cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 paradigm of interest rates.

    ReplyDelete
  2. Basil H, glad you asked him! Did anyone else have anything to say about it?

    ReplyDelete
  3. The ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r responses weren't as substantive as Taylor's:

    Bob Lucas joked that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Fed should adopt it, since, if it did, UChicago would get some credit since Scott Sumner's a UChicago PhD. Allan Meltzer, as far as I can recall, didn't so much address NGDP targeting as he did just attack cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Fed for being too discretionary. He actually became quite passionate in his criticism, saying that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Fed's large amount of discretionary power conflicts with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 basic principles of a democracy.

    ReplyDelete