In his latest post Altig writes:
…and here is the Bush comment:
Just to add to Andy’s point, advocates of NGDP level targeting argue that it’s precisely because of uncertainty around estimates [of] potential output [that] NGDP targeting should be adopted. They argue that [as] long as the central bank keeps nominal spending on, say, a 5% trend line, there will be neither demand side recessions (mass unemployment) nor high inflation. In other words, AD will be stable and this will produce a stable macroeconomic environment. Whether inflation is 2% and real output [grows] at 3% or inflation is 3% and real output grows at 2% is of no concern.
In the post on NGDP targeting I was in fact thinking about level targeting, and Gregor Bush’s last sentence gets to—in fact is—the heart of our disagreement. I am just not willing to concede that anchoring long-term inflation by saying something like “2 percent, 3 percent, whatever” is the path to sustaining central bank credibility. Over the longer term, inflation is the only thing that monetary policy can reliably deliver, as the Federal Open Market Committee (FOMC) has clearly articulated in its statement of longer-run goals and policy strategy.
And he then he does a bad job of qualifying NGDPT-LT (my bold):
My price-level targeting post, co-authored with Mike Bryan, was exactly making the point that, over the past couple of decades, the FOMC has essentially delivered on a 2 percent longer-term price-level growth objective, while accepting plenty of shorter-term variability.
In the end, it is an open question whether credibility in delivering price stability, hard won in the ’80s and early ’90s, could be sustained if the FOMC says it does not care so much about the exact level of the average rate of inflation, even in the long run. To be truthful, I can’t give you an answer to that question. But neither can the proponents of NGDP targeting. I just don’t feel that this is an opportune time for an experiment.
You could also say that between 1987 and 2007 the “FOMC has essentially delivered a 5.5% NGDP growth along a stable trend path, while generating (note, NOT accepting) plenty of short term variability” (which took place between 1998 and 2005) as the following chart (depicting the NGDP gap) attests.
Also, MM´s never said that they “don´t care about the average level of inflation, even in the long run”. They recognize that the nominal spending growth trend will have to be revised with incoming information on “potential growth”. The point is that in the 1987-2007 period average real growth was around 3.2%, which had been in place since the early 1960s. So 5% + NGDP growth was consistent with long run average inflation close to 2%.
PS: I had dealt with Altig´s original NGDPT post here.
Historinhas 