Recently, the IGM Forum (a panel of economic experts) made the following proposition:
The persistent deflation in Japan since 1997 could have been avoided had the Bank of Japan followed different monetary policies.
When weighted by the respondent´s degree of confidence, “strongly agree” won with 43% of the ‘votes’ (adding those that ‘agreed’, the total was 73%). Maybe they think the US situation is not so ‘clear cut’!
This is Robert Hall´s vote:
|Central banks lose control of the price level at the zero lower bound, when their reserves become close substitutes for government debt.|
I found Robert Hall´s answer very strange. He ‘disagreed’ with a pretty high degree of ‘confidence’ (7 (out of 10)), and the reason he gave for disagreeing is even more strange, coming from a person that exactly 20 years ago (January 1993) wrote a paper (with Mankiw) favorable to NGDP targeting!
In that paper Hall and Mankiw conclude:
Although nominal income targeting is not a panacea, it is a reasonably good rule for the conduct of monetary policy. Simulations of a simple macro model suggest that, compared to historical policy, the primary benefit of nominal income targeting is reduced volatility in the price level and the inflation rate.
Under conservative assumptions, real economic activity would be about as volatile as it has been over the past forty years. If the elimination of spontaneous shifts in monetary policy improves forecasts markedly, real activity could be much less volatile.