The momentum for NGDP targeting is clearly building. Anybody who is interested in monetary policy and in what will be driving the global market sentiment going forward should have a look this issue.
The latest convert is Christina Romer the former chair of Council of Economic Advisers.
Have a look at Dr. Romer’s open letter to Ben Bernanke.
——
Update: Scott Sumner has an excellent comment on Christina Romer, where he pays tribute to the great Bennett McCallum. Some thing I naturally appreciate very much given the attention that I have been giving to McCallum and the McCallum rule myself.
David Beckworth also has a comment on Romer (and some Baseball stuff an European like me can’t understand…)
See a few of my McCallum posts here:
Bennett McCallum – grandfather of Market Monetarism
More on the McCallum-Christensen rule (and something on Selgin and the IMF)
Peter
/ October 29, 2011That was so beautiful. I even got tears in my eyes. And a link to a Scott Sumner piece. Big thanks to Christina Romer!
I’ll add her to my list of proponents: http://www.ngdp.info/nominal-GDP-level-target-proponents.aspx
Peter
/ October 29, 2011Although, she’s former chair…
Lars Christensen
/ October 29, 2011Peter, correct…that typos is now corrected.
Desolation Jones
/ October 29, 2011Macro is going to be awfully boring once NGDP path targeting is implemented. These past two years I read up heavily on monetary theory just for fun, and all that new found knowledge is going to be useless once we have a smooth running economy. I guess there’s still growth theory, but that makes me want to fall asleep.
RIP Liquidity trap: You made arguing economics on the internet fun.
Lars Christensen
/ October 29, 2011DJ, that is so right. I NGDP level targeting could more or less kill off all macroeconomic discussion. In fact that is exactly what happened during the Great Moderation. When US NGDP was growing at 5-51/2 most macroeconomic discussion disappeared. Say’s Law will be all you need to know.
But lets see – my feeling is we are quite far away from winning this battle. There are still a lot of monetary dysfunctional countries around even if one or two countries starts targeting NGDP.
And then remember – it was New Zealand that was first to introduce inflation targeting. That is 20 years ago and most Western countries with floating exchange rates have followed suit and so have many Emerging Markets, but the Fed still is not really targeting anything.So lets see whether Bernanke & Co. will be moving anywhere soon.
Benjamin Cole
/ October 30, 2011The Romer piece is great, but NGDP targeting and Market Monetarism are not yet policy—everybody please keep blogging, writing letters to the editor, sending letters to the Fed, etc.
The only fly in the ointment is that Romer did not use the excellent phrase, “Market Monetarism.”
Now is the time to get Bernanke on board somehow. We have won the debate—now we need to win the policy war.