Woolsey on DeLong on NGDP Targeting

Interestingly enough both Paul Krugman and Brad DeLong have now come out in favour of NGDP level targeting. Hence, the policy recommendation from these two Keynesian giants are the same as from the Market Monetarist bloggers, but even though the Keynesians now agree with our policy recommendation on monetary policy in the US the theoretical differences are still massive. Both Krugman and DeLong stress the need for fiscal easing in the US. Market Monetarists do not think fiscal policy will be efficient and we are in general skeptical about expanding the role of government in the economy.

Bill Woolsey has an excellent comment on Brad Delong’s support for NGDP targeting. Read it here.

Despite theoretical differences it is interesting how broad based the support for NGDP level targeting is becoming among US based economists (In Europe we don’t have that sort of debate…we are just Calvinist…)

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  1. Benjamin Cole

     /  October 20, 2011

    I think it will take Federal Reserve Board adoption of NGDP to catch the eye of Europeans. But maybe now, with all the buzz…..

  2. Ben, I unfortunately think that Europe is a completely lost case. We are in a terrible state and our policy makers have no clue.

  3. Market monetarists think NGDP targeting is fundamentally superior to inflation targeting, but people like Krugman seem to just think it is an easier sell to the public.

  4. Alex Salter

     /  October 21, 2011

    I’m not a huge fan of Krugman or DeLong, but I can’t deny their star power is good for Market Monetarism. Actually, their support sort of confuses me. An NGDP target obviates the need for fiscal stimulus as a countercyclical tool. Why would two of the greatest advocates for fiscal stimulus and the liquidity trap suddenly jump ship?

  5. Alex: because they don’t think they are going to get the fiscal stimulus they want, but do actually want the US economy to get better.

    Lars: on Europe, you have my profound sympathies. Alas, I believe that both the euro-adventure itself and the miserable response to the problems are a product of deep problems with the EU’s “underlying theory”.


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