Thursday, September 18, 2014

Woodford on Nominal GPD Level Targeting

Woodford was interviewed by the Minneapolis Fed and has some positive things to say about Nominal GDP level targeting.


  1. Lots of thoughtful blogging of late.

    But I think a 4 percent NGDP target is just too low. Monetary asphyxiation time.

    Maybe 5 or 6 percent NGDP is a good target.

    As, say, 6 percent, we know we are giving the engine plenty of gas, rewarding risk-taking etc. Yet, there is no threat off "runaway" inflation, as we are at 6 percent NGDP.

    Unless there is an actual contraction of economic output, the highest rate of inflation would be 6 percent. In a normal time, we might see 3 percent inflation--and btw, the Aussie Reserve Bank targets 2-3 percent inflation, and I think Israel does a 1-3 percent band target.

    Both those nations seemed to have sidestepped the 2008 recession.

    Prosperity should be the goal of macroeconomic policy.

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