tag:blogger.com,1999:blog-6638187113544241481.post1250480073790786302..comments2024-02-27T01:53:25.186-05:00Comments on Synthenomics: Why Nominal GDP Targeting Solves the Credibility ProblemYichuan Wanghttp://www.blogger.com/profile/15398092824604478764noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-6638187113544241481.post-76807597754252540942013-07-03T22:22:20.710-04:002013-07-03T22:22:20.710-04:00I'm not sure if a nominal GDP targeting regime...I'm not sure if a nominal GDP targeting regime would be that bad for lenders. There has been a lot of work done by other bloggers on how nominal GDP targeting insures both lenders and borrowers in a counter-cyclical fashion, so nominal GDP targeting would help deliver a result closer to what amounts to a coordinated haircut among creditors. Of course, I certainly hope that Fed policy is not just dictated by a handful of banks, but I'm not sure if it matters too much in the case of monetary policy. Now capital requirements on the other hand...well, that's just a different story.Yichuan Wanghttps://www.blogger.com/profile/15398092824604478764noreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-68303152154719899592013-07-03T09:15:42.390-04:002013-07-03T09:15:42.390-04:00Anyone in the "know" want to hazard a gu...Anyone in the "know" want to hazard a guess on the possibility of the Fed actually establishing an NGDP target? For all the positive effects that establishing this target could have on a "real" economy, it seems like it would generate uncertainty about the inflation rate for lenders. Don't banks still pretty much dictate monetary policy to the Fed?<br /><br />Great idea, though - it just seems much too bold for current policymakers.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-39158468504436036822013-07-03T07:12:22.017-04:002013-07-03T07:12:22.017-04:00Yes. The analogy I like to make is between central...Yes. The analogy I like to make is between central banks and judges. On the face of it, judges face a big credibility problem: "The murder has already been committed; the victim is dead, and there's no point in creating a lot of additional costs to society by imprisoning the murderer, so I will let the murderer go free." But in practice judges like to enforce the law, and if the government wants to change judges preferences, it just changes the law.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-62508846041561806712013-07-01T23:31:18.349-04:002013-07-01T23:31:18.349-04:00“And if nominal GDP is so far below trend that you...“And if nominal GDP is so far below trend that you[r] interest rate is stuck at zero, then provide forward guidance that the interest rate will be at zero until nominal GDP normalizes. Even though this is about future policy, there is no commitment problem. The promise is already optimal.” The point is well taken, but note that fulfilling this promise may be insufficient: QE might be needed as well.<br /><br />Another objection to NGDP targeting is that NGDP is hard to measure, so that measurements of recent-past NGDP may come in with surprising numbers, which may later be revised in unexpected ways. But the Fed should target not the actual level NGDP but the level estimated for future NGDP, one or two years into the future. The slogan: “Target the forecast.”<br />Philohttps://www.blogger.com/profile/02814125172453918700noreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-2628328824035709822013-07-01T22:01:42.110-04:002013-07-01T22:01:42.110-04:00You certainly did. I took the liberty to link over...You certainly did. I took the liberty to link over at my blog as "A post not to be missed (under any circumstance).<br /><br />Evan was asking us to write on the topic given with Carney in mind. This was the best argument for him.João Marcushttps://www.blogger.com/profile/13658264244033012660noreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-91902016645564090582013-07-01T21:33:58.137-04:002013-07-01T21:33:58.137-04:00Thanks. I'm certain these points on credibilit...Thanks. I'm certain these points on credibility have been made before, but I haven't seen it cast in terms of loss functions before. I thought I could make a contribution on that point.Yichuan Wanghttps://www.blogger.com/profile/15398092824604478764noreply@blogger.comtag:blogger.com,1999:blog-6638187113544241481.post-45104045586983625012013-07-01T19:55:18.327-04:002013-07-01T19:55:18.327-04:00YW
Great post. Why doesn´t Mark Carney argue along...YW<br />Great post. Why doesn´t Mark Carney argue along those lines?João Marcushttps://www.blogger.com/profile/13658264244033012660noreply@blogger.com