Working Paper: NBER ID: w9981
Authors: Marvin Goodfriend
Abstract: The paper begins by tracing the origins of the case for inflation targeting in postwar US monetary history. It describes five aspects of inflation targeting practiced implicitly by the Greenspan Fed. It argues that (1) low long run inflation should be an explicit priority for monetary policy, (2) as a practical matter it is not desirable for the Fed to vary its short run inflation target (3) strict inflation targeting can be regarded as effcient constrained countercyclical stabilization policy. Finally, the paper suggests that the Fed publicly acknowledge its implicit priority for low long run inflation, that Congress recognize that priority, and that in return representatives of the FOMC consider participating in a monetary policy forum to better inform the public and congressional oversight committees about current monetary policy.
Keywords: No keywords provided
JEL Codes: E3; E4; E5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fed's inflation targeting (E52) | improved macroeconomic performance (E69) |
| Fed's inflation targeting (E52) | lower inflation rates (E31) |
| lower inflation rates (E31) | more stable economic growth (O40) |
| prioritization of inflation (E31) | better economic outcomes (P17) |
| lack of inflation targeting (E31) | economic volatility (E32) |
| transparency in monetary policy (E52) | public accountability (H83) |
| public accountability (H83) | good monetary policy (E52) |