UK vs NGDPLT, More Debate
This post is just another round-up of NGDP discussion in the UK media and/or blogosphere. Back in the old days when we had one discussion of NGDP in the UK media per month it was easy to keep up! No longer. In no particular order:
- The bond vigilantes over at fund manager M&G were not terribly impressed with the idea, worrying about how to pick the right level target, inflation expectations and supply-side capacity.
- Posen’s replacement on the MPC, Ian McCafferty, had an interview with Bloomberg, written up here. First question? You guessed it. McCafferty is basically a hawk and is worried about wages rising.
- David Blanchflower has expanded his argument against targeting NGDP in the Indy. Blanchflower is a forceful critic and makes good arguments, so this deserves more time. The revision data he present are to the quarterly growth rate of NGDP (which doesn’t matter) not the level (which does). He could make a stronger argument if he presented the revisions to the level. I want to do another post on this topic.
- Mark Carney got a tonne of coverage during the WEF which was well trailed; see Chris Giles here for example.
- Philip Booth at the IEA wonders whether the Bank is already targeting NGDP. The short answer is “not really”, but inflation forecast-targeting will always look a bit like NGDP rate targeting if you scratch beneath the surface.
- BBC Newsnight political editor Allegra Stratton asks “Could ‘hot potato economics’ trigger an economic recovery?” – new insights mainly into UK politics, but any article on macro policy which uses both the words “potato” and “thermostat” is worth a read.
- Sticking with Auntie, Stephanie Flanders discusses “The Bank of England, the chancellor, and the target“.
- Simon Wren-Lewis follows up on Ms Flanders, with “When formal monetary policy targets are useful“.
On the last two points, Scott Sumner addressed the argument about credibility and time-inconsistency last year; to me it seems utterly bizarre to have this discussion in 2013, doubting whether the Bank, the government, or voters will tolerate tight money. They are. We are. We have been for four damn years. And now it’s time for a change. Can’t it be that simple?
The argument seems to reduce to “We can’t leave the depression in case we have a boom!” Would that be acceptable to voters if they knew it was the choice on the table?
(As an aside, I think the little people, the voters, are vastly underrated. When I was travelling around visiting friends over Christmas there were a couple of times when people compared the current state of the UK economy with the Depression. What’s the phrase they use? “Money is tight”. Yet Mervyn King says money is easy. King is wrong and my friends were right… this time at least. I’m too young to remember, but it made me wonder, was that also true in the 1970s, did people think “money was tight” back then too?)