I have a new policy brief out on NGDP level targeting. The article summarizes in an accessible manner the key arguments for NGDP level targeting while also addressing the main concerns of this approach. The policy brief also shows how one could implement a NGDP level target in practice. The article comes out now as part of the conversation the Fed is having this year in its review of monetary policy. Please check it out.
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Well, I am a fan of NGDPLT (which in the old, old days, in the 1960-70s FOMC meetings, was referred to as targeting unadjusted GNP growth, plain and simple).
ReplyDeletehttps://www.blackrockblog.com/2019/10/03/going-direct-how-central-banks-could-deal-with-the-next-downturn/
Still, there are now serous people advocating money-financed fiscal programs as the necessary next stpe in macroeconomic management. See link.
It may be that hitting NGDPLT with negative interest rates and QE alone won't do the trick, or at least along any type of time-frame that make sense for democracies. Wen people are unemployed, we need to think in terms of weeks and months to a fix, not years.
If the Fed simply ran a savings and loan bank for qualified wholesale money dealers.
ReplyDeleteThere is one rule, the Fed will lose some X dollars over the next Y years, and renegotiate an optional contract (with Congress) to repeat. That defines it. The resulting math will generate a unique, efficient process to allow free betting by optimization of trader's S/L ratio. You end up with a no arbitrage NGDPLT, automated actually.
Plus you need the renewal contract option, that is what guarantees your permanency all parties betting the value of a repeat. And, finally, you have some serious negotiating with Congress and the Supremes, I am afraid to say.