From the people that brought you the idea of a “self-financing deficit”

Now it´s:

Target the path of nominal GDP, people!

And that is uttered by uber Keynesian Brad Delong, a firm believer in the liquidity trap.

And before Scott Sumner even started blogging and pushing the NGDPLT idea Brad says he was “on to it”:

You know, I thought three-and-a-half years ago that this would work out very differently.

I thought three-and-a-half years ago that the Federal Reserve would announce that its mission was primarily to keep economy-wide nominal spending on its pre-2008 growth path, that this was an emergency situation, and as long as economy-wide nominal spending was below its pre-2008 growth path additional accommodation was warranted.

No dice.

Anyone recalls Brad advocating NGDP targeting? Why doesn´t he link to it? After all his blog is one of the oldest on record.

Circumstantial evidence: His “master & mentor” – Krugman – only endorsed NGDPLT a few months back after Christy Romer wrote her NYT piece

HT: dwb

3 thoughts on “From the people that brought you the idea of a “self-financing deficit”

  1. But even now, he still only wants to approximate the path of NGDP using “interim inflation targets”. As Scott says, the recession happened because New Keynesians simply don’t get monetary economics as intuitively well as Market Monetarists: the cure is to spread MM over and above NK. DeLong betrays that he still doesn’t really *get* NGDP targeting – he still insists on speaking the language of interest rates and inflation targets. It’s still the “promise to be irresponsible, inflate your way out” misunderstanding. That’s not even going to win Bernanke over, much less the Republicans.

    If you’re going to use ISLM, at least use it properly, like Nick Rowe does. It’s main flaw is that it puts Keynesians in what I call a short run box. The expected inflation route is simply one way of importing the long run into the box, and not the best one. An intelligent economist would understand that effective monetary policy shifts IS to the right – at least, from the short-run reference frame.

  2. IS and LM both, actually, since the rise in consumption and investment comes at the expense of money demand, once the level target becomes credible.

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