Thursday, September 8, 2011
Everyone loves NGDP Targeting
One question I'd like settled before the Fed (as a collection of interested parties)- rather than a notional futures market - engages in NGDP targeting is how to set the target. Without hand-waving, can anyone reasonably say why a 6% target is the right target and not 7%? How's about 10%? I mean, if we want more growth, why not?!
It's not hard to see where this would go. Replace all the above-mentioned political hand-wringing about multipliers and GM with political pressuring for "just a little bit more" income and jobs. That could be a hell of a Pandora to let out of the box in any case... but especially if our theory of target-setting is essentially taking a swag.