A couple of weeks ago I wrote commenting on Krugman´s paper – suggesting the need for a higher inflation target – to be presented at the ECB Sintra Conference:
It´s a waste of time because it is the wrong product to the wrong customers at the wrong time!
Lo and behold, this was Draghi´s response at the Conference:
Try telling that to Germany. “What would it mean for a German, for example, to have a 5% objective in the whole of the euro area?” Mr. Draghi asked later Tuesday. “I don’t even want to think [about] that.”
But to some, like Edward Lambert:
I think that higher inflation targets is a solution for some who cannot accept the dynamics of the Fisher effect where inflation is low due to low nominal rates from the central banks.
Mario Draghi needs to think about the Fisher effect instead of higher inflation targets.
Nothing like a ‘lesser depression’ to mess people´s head!
On the “Fischer effect controversy” see this Josh Hendrickson post:
There is an important lesson to be learned from this controversy and debate. The lesson is that even though policy is conducted with the federal funds rate as an intermediate target or with interest on reserves as an instrument, it is still necessary to know the underlying path of the money supply associated with this interest rate policy.