Re: Monetary & Fiscal Policy in a Low-Interest Rate Economy:
Seems like a problem is in reframing policy as "what interest rate." The Fed should just stick to it's mandate of stable prices (=2% PCR inflation) and maximum employment and interest rates are whatever they have to be to carry out that policy. Of course that puts the uncert…
Re: Monetary & Fiscal Policy in a Low-Interest Rate Economy:
Seems like a problem is in reframing policy as "what interest rate." The Fed should just stick to it's mandate of stable prices (=2% PCR inflation) and maximum employment and interest rates are whatever they have to be to carry out that policy. Of course that puts the uncertainty on "maximum employment" but that's surely closer to being observable than r*.
And whatever the Fed's instrument, there is no role for "fiscal policy" unless the Fed is self constrained in its willingness to purchase private vs public debt (as it seemed to be in the QE days).
Re: Monetary & Fiscal Policy in a Low-Interest Rate Economy:
Seems like a problem is in reframing policy as "what interest rate." The Fed should just stick to it's mandate of stable prices (=2% PCR inflation) and maximum employment and interest rates are whatever they have to be to carry out that policy. Of course that puts the uncertainty on "maximum employment" but that's surely closer to being observable than r*.
And whatever the Fed's instrument, there is no role for "fiscal policy" unless the Fed is self constrained in its willingness to purchase private vs public debt (as it seemed to be in the QE days).