The idea of permanently raising inflation targets to 4%, first proposed by IMF chief economist Olivier Blanchard, has been endorsed by a number of other academics, including, most recently, Paul Krugman. Unfortunately, the problem of ensuring a smooth and convincing transition to a new target is perhaps insurmountable.
PARIS – For some time now, there has been concern that central bankers have “run out of bullets.” Having lowered their policy rates to near zero, they have engaged in increasingly extravagant measures such as “quantitative easing” and “forward guidance.” Given the fog cast over real economic activity by the financial crisis, it is difficult to offer a definitive assessment of just how well or badly those measures have worked. But it is clear that there must be a better way to do things.
PARIS – For some time now, there has been concern that central bankers have “run out of bullets.” Having lowered their policy rates to near zero, they have engaged in increasingly extravagant measures such as “quantitative easing” and “forward guidance.” Given the fog cast over real economic activity by the financial crisis, it is difficult to offer a definitive assessment of just how well or badly those measures have worked. But it is clear that there must be a better way to do things.