Photo: Michael Woodford, Columbia
Last week at Jackson Hole, economist Michael Woodford (the world’s foremost expert on monetary policy), presented a groundbreaking paper on what the Fed could do to stimulate the economy with interest rates at 0%. Rather than asset purchases (as Bernanke has favoured), Woodford suggested that the Fed could do much more with its foreward guidance and commitments, and target Nominal GDP.Yesterday we published a piece on the fact that there’s a lot of interesting economics happening these days in academia, but it doesn’t really seem to be getting through to policymakers, so we asked Woodford for his take on how his paper went over at the conference.
We wanted to break his response out here:
Many people in the audience expressed appreciation for the paper (at least to me!). I would say the reaction of Fed officials, to the extent that I could discern it, was a lot cooler. (Quite a few Fed staff instead told me “these are concerns we are all talking about, it is good that someone can express them…”)
So Fed staff and general audience members liked it. Actual Fed officials were a lot cooler. The question is: How long until the new ideas pierce the bubble and we get some fresh efforts at changing the course of things?
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