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Best I can tell, market monetarism devolves to assumptions/beliefs about which strength of the EMH to use and about volatility. I'm interpreting "market moneta

Best I can tell, market monetarism devolves to assumptions/beliefs about which strength of the EMH to use and about volatility. I'm interpreting "market monetarism" as "use an NGDP futures market". This should (IMO) be viewed as a decent summary: http://noahpinionblog.blogspot.com/2012/07/excess-volatility-and-ngdp-futures.html http://noahpinionblog.blogspot.com/2012/07/excess-volatility... I am not 100% sure I actually understand the post - I'd think that a "low pass filter" could be applied to Fed actions to address this, but it could easily be that I'm simply wrong about that. I have two competing biases - one, control theory, and two, a skepticism of how the EMH works out in real life. Also, it's not clear to me exactly what would happen if the Fed simply adopted say, a 4% inflation target.

eru 10y ago
I wouldn't use Noahpinion to learn about market monetarism. See Scott Sumner's comment on this very piece at https://noahpinionblog.blogspot.com.au/2012/07/excess-volatility-and-ngdp-futures.html?showComment=1341524261442#c5205186238350730702 https://noahpinionblog.blogspot.com.au/2012/07/excess-volati... > Also, it's not clear to me exactly what would happen if the Fed simply adopted say, a 4% inflation target. In practice, they seem to have an inflation ceiling, not an inflation target. But it has not too much to do with nGDP targeting. (Or only insofar as nGDP targeting right now would suggest looser money, so going for more inflation would do the same thing.) Also, are you talking about a 4% level target?
- ArkyBeagle 10y ago
  Wow. I was trying to be balanced about it. I didn't read the comments ( mea culpa ). I generally read Sumner first. But I've caught that criticism of market monetarism from other sources. Now I wonder if it's valid. I was talking about two things - nGDP and a 4% inflation target. I wish we were talking about a 4% inflation target, although after watching the Yellen grilling a coupe of Mondays ago I wonder of we can even do that.
  - eru 10y ago
    What we are actually interested in is eg industrial output and unemployment. Stable nGDP growth seems pretty closely correlated with those two. Inflation less so. The standard examples are: the oil price shocks of the 1970s gave us inflation, but nGDP crashed. The IT bubble and the housing bubble saw nGDP grow above trend, but not inflation. Nominal GDP is relatively straightforward to define and measure; inflation comes with all kinds of thorny philosophical questions about quality improvements. That being said, targeting the trajectory of the price level (=`level targeting') might still be a better idea than the current system, where the central banks see their inflation targets as ceilings instead, and don't make up this year for the targets they missed last year. Scott Sumner argues that targeting aggregate nominal labour income might actually be slightly superior to targeting nGDP, but it's wages that are sticky. But the labour share of GDP is pretty stable over time in rich, diversified economies, so it doesn't make too much of a difference. The best advertisement for nGDP targeting I've read was Scott Sumner's slogan that it's making the world safe for laissez faire capitalism: it's much harder to organise political opposition to creative destruction, if everyone knows that full employment is almost guaranteed, and there won't be any recessions. Let the banks fail, abolish tariffs, let the immigrants in, review restrictive licensing requirements, etc.
    - ArkyBeagle 10y ago
      Yep. Having (mis)read "A Monetary History of the United States" as an undergrad and having done an actual research paper on "why was there a Depression" by interviewing older relatives in the 1970s, I was extremely receptive to Sumner's ideas. And your point about the oil shocks - and WIN buttons - also contributed to this.
      - eru 10y ago
        WIN buttons? I am currently reading Sumner's book about the Great Depression ("The Midas Curse"). Seems pretty interesting so far. Now, I just need to find a country to migrate to that does nGDP targeting and finances itself via land value taxes alone.

eru 10y ago

I wouldn't use Noahpinion to learn about market monetarism. See Scott Sumner's comment on this very piece at https://noahpinionblog.blogspot.com.au/2012/07/excess-volatility-and-ngdp-futures.html?showComment=1341524261442#c5205186238350730702 https://noahpinionblog.blogspot.com.au/2012/07/excess-volati... > Also, it's not clear to me exactly what would happen if the Fed simply adopted say, a 4% inflation target. In practice, they seem to have an inflation ceiling, not an inflation target. But it has not too much to do with nGDP targeting. (Or only insofar as nGDP targeting right now would suggest looser money, so going for more inflation would do the same thing.) Also, are you talking about a 4% level target?

ArkyBeagle 10y ago
Wow. I was trying to be balanced about it. I didn't read the comments ( mea culpa ). I generally read Sumner first. But I've caught that criticism of market monetarism from other sources. Now I wonder if it's valid. I was talking about two things - nGDP and a 4% inflation target. I wish we were talking about a 4% inflation target, although after watching the Yellen grilling a coupe of Mondays ago I wonder of we can even do that.
- eru 10y ago
  What we are actually interested in is eg industrial output and unemployment. Stable nGDP growth seems pretty closely correlated with those two. Inflation less so. The standard examples are: the oil price shocks of the 1970s gave us inflation, but nGDP crashed. The IT bubble and the housing bubble saw nGDP grow above trend, but not inflation. Nominal GDP is relatively straightforward to define and measure; inflation comes with all kinds of thorny philosophical questions about quality improvements. That being said, targeting the trajectory of the price level (=`level targeting') might still be a better idea than the current system, where the central banks see their inflation targets as ceilings instead, and don't make up this year for the targets they missed last year. Scott Sumner argues that targeting aggregate nominal labour income might actually be slightly superior to targeting nGDP, but it's wages that are sticky. But the labour share of GDP is pretty stable over time in rich, diversified economies, so it doesn't make too much of a difference. The best advertisement for nGDP targeting I've read was Scott Sumner's slogan that it's making the world safe for laissez faire capitalism: it's much harder to organise political opposition to creative destruction, if everyone knows that full employment is almost guaranteed, and there won't be any recessions. Let the banks fail, abolish tariffs, let the immigrants in, review restrictive licensing requirements, etc.
  - ArkyBeagle 10y ago
    Yep. Having (mis)read "A Monetary History of the United States" as an undergrad and having done an actual research paper on "why was there a Depression" by interviewing older relatives in the 1970s, I was extremely receptive to Sumner's ideas. And your point about the oil shocks - and WIN buttons - also contributed to this.
    - eru 10y ago
      WIN buttons? I am currently reading Sumner's book about the Great Depression ("The Midas Curse"). Seems pretty interesting so far. Now, I just need to find a country to migrate to that does nGDP targeting and finances itself via land value taxes alone.