Friday, January 4, 2013

Kroszner on Fed Communications

Former Fed Board of Governor Randy Kroszner mentions a target for nominal income and a "whatever it takes" approach to communicating policy in a New York Times piece.

The highest priority in the economic revival plan of the newly elected prime minister, Shinzo Abe, is to strong-arm the Bank of Japan into acknowledging that it will do simply “whatever it takes” to reverse deflation there and allow a recovery to take root.
Mark J. Carney, the head of Canada’s central bank and soon to be the governor of the Bank of England, also seems to be embracing the “whatever it takes” theory of communications: tying monetary policy to a single measure of overall economic health (like nominal income) rather than multiple metrics (inflation, inflation expectations, unemployment numbers) that may be even easier to understand.
The Fed might well consider alternative economic indicators as it assesses whether its interventions are reducing uncertainty and promoting recovery. But the key, it seems, is to be forthcoming about its thinking with the American people. For now, the bank’s smart, calibrated open-mouth policy has been a step in the right direction.
Well, only a parenthetical statement by a former governor and the article as a whole is a giant confusion of money and credit, but every little bit helps.

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