Wednesday, September 2, 2020

The Fed's New Framework

I have a new article presenting my take on the Fed's new average inflation target (AIT). It includes an explanation of how it works compared to the Fed's previous inflation target and what it could mean for the recovery. I note that although AIT it is not quite a NGDP level target, it is a step in that direction. Moreover, it could lead other central banks to follow suit. Check it out.

Also, here is an earlier piece I wrote on make-up policy and how it could be best implemented via a NGDP level target. It was published before the big announcement last week.

Finally, here is St. Louis Fed President Jim Bullard's take on AIT. He explains how this new framework gets us fairly close to NGDP level targeting.