Just one week after coming out in favor of NGDP level targeting, she doesn´t recognize the monetary origins of the “Great Recession” and makes a spirited defense of fiscal policy stimulus both past (ARRA) and needed future ones:
Importantly, President Obama was completely right. Though there was, and still is, much more the Fed could do, the recession developing the fall of 2008 was already terrible, and getting worse by the minute. We needed to hit it with every tool we had, especially fiscal policy.
The research I have been discussing this evening suggests that more fiscal stimulus would be very helpful. Despite all of the claims and protestations, the evidence is that fiscal stimulus does raise output and employment significantly. Now, it would take another bold move—probably substantially larger than the $450 billion program President Obama has proposed—to really create a lot of jobs. But the evidence says it would work.
Lately Scott Sumner has been very critical of the studies (many of which are favorably reviewed by Christy Romer) that purport to show the effectiveness of fiscal policy stimulus (high multiplier).
From what I gather, a bold move coming from the monetary policy camp would be much easier to implement and much more “cost effective” than a bold move from fiscal policy.
But maybe I´m wrong since lately the monetary policy people have been asking for help from the fiscal guys.