Essays on nominal determination

We have not yet mentioned one peculiarity of the argument for a higher inflation target. Even though Yellen signaled her openness to that argument, we have actually been below 2 percent inflation for eight years — which is to say, before, during, and after the Fed’s formal adoption of that target. In some quarters the Fed’s failure to hit its target has led to doubt about whether the Fed even has the capacity to raise inflation any more, in which case its capacity to increase nominal spending would also have to be questioned. This doubt is unjustified: The Fed has repeatedly refrained from taking steps that would have increased inflation further, and taken steps that reduced it.

Essays on nominal determination

essays on nominal determination

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