Monday, October 28, 2013

Romer's Lecture on Monetary Policy

Christina Romer has an interesting lecture on monetary policy.

On the bright side she again advocates nominal GDP level targeting, both as a solution for the current crisis and a long term regime.

She also explains how the shift in monetary policy in the Great Depression spurred the recovery of 1933.    In fact, it seemed she just covered ground that Scott Sumner covered years ago.

Less happily, she advocates greater bank regulation.   On the other hand, increased capital requirements are one of the least bad approaches--at least if banks can "use" their capital cushions when losses develop.

Worse, she wants central banks to try to pop asset bubbles.     My view is that the monetary authority should focus entirely on expected nominal GDP.    Allowing/causing expected nominal GDP to fall in order to cause asset prices to fall towards what the monetary authority thinks is the proper mistake is malpractice.

HT Marcus Nunes.

1 comment:

  1. Thanks for sharing it, we all need to be careful with GDP since nothing should be done on what we think instead we should focus on doing things on been certain, its only way we will achieve positive results or else we will struggle badly. I always go on things when I am certain and thanks to OctaFX broker, I am able to do it nicely which is through daily market news and analysis service, it’s easier to follow yet highly effective as far accuracy goes.