Style note: I'm suddenly noticing posts with failed markup (leading and trailing underscores or asterisks that don't work) all over Substack. Very distracting.
Question: Does the word "monetary" have any content any more, other than describe "what the Fed does" as opposed to "fiscal" (what the government does)? The answer seems pretty closely tied to the interest on reserves issue, and it would be useful, sometime, to have that spelled out, in your terms rather than Sumner's, more completely.
Question: Did FIAT die a quick natural death as soon as the problem was too much inflation rather than too little?
Observation: Apart from its merits (if there are any), is NGDP targeting even possible in the real world. By possible I mean "politically possible." I don't see how the Fed's mandate could possibly survive its having an opinion on whether the economy was too big or too small. For the Fed's customers (Congress, the media, the voters -- not, in this case, the banks), there is no too big.
I think you are pretty close on "monetary" and "fiscal"
AFAICT FIAT is alive and well-ish. The Fed, partly for the operational reasons that Horan and others have criticized, was too slow to raise and then too slow to reduce the EFFR and so did not wholly successfully manage FIAT.
NGDP could be useful when the Fed needs to increase inflation but knows it is impolitic to say so out loud. :) But that is a question I'd like proponents of NGDP targeting t address.
I doubt monetary policy problem is about what to “target”, but mostly the fact that between monetary policy and both monetary aggregates and GDP, you have the banking system.
You can lower rates or expand the balance sheet, but anything you do can be undone by the money multiplier. All targets are vey easy to miss, because your bullet has to pass a hard to assess medium: the banking system.
“Variance” looks to me too optimistic. In monetary policy there is at least the same uncertainty (both in observation and mechanism) between central bank instruments and monetary aggregates than between monetary aggregates and macro variables.
Style note: I'm suddenly noticing posts with failed markup (leading and trailing underscores or asterisks that don't work) all over Substack. Very distracting.
Question: Does the word "monetary" have any content any more, other than describe "what the Fed does" as opposed to "fiscal" (what the government does)? The answer seems pretty closely tied to the interest on reserves issue, and it would be useful, sometime, to have that spelled out, in your terms rather than Sumner's, more completely.
Question: Did FIAT die a quick natural death as soon as the problem was too much inflation rather than too little?
Observation: Apart from its merits (if there are any), is NGDP targeting even possible in the real world. By possible I mean "politically possible." I don't see how the Fed's mandate could possibly survive its having an opinion on whether the economy was too big or too small. For the Fed's customers (Congress, the media, the voters -- not, in this case, the banks), there is no too big.
Comment: NG
I think you are pretty close on "monetary" and "fiscal"
AFAICT FIAT is alive and well-ish. The Fed, partly for the operational reasons that Horan and others have criticized, was too slow to raise and then too slow to reduce the EFFR and so did not wholly successfully manage FIAT.
NGDP could be useful when the Fed needs to increase inflation but knows it is impolitic to say so out loud. :) But that is a question I'd like proponents of NGDP targeting t address.
Thomas, this explains it better;
https://onlinelibrary.wiley.com/doi/epdf/10.1002/soej.12729
Not really a head to head comparison and does not answer the questions I pose.
I doubt monetary policy problem is about what to “target”, but mostly the fact that between monetary policy and both monetary aggregates and GDP, you have the banking system.
You can lower rates or expand the balance sheet, but anything you do can be undone by the money multiplier. All targets are vey easy to miss, because your bullet has to pass a hard to assess medium: the banking system.
That adds variance to the ability to target but, that's life. Your model includes bank behavior and you optimize the best you can.
“Variance” looks to me too optimistic. In monetary policy there is at least the same uncertainty (both in observation and mechanism) between central bank instruments and monetary aggregates than between monetary aggregates and macro variables.