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Brad DeLong's Grasping Reality 2019-09-18 16:20:38

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I confess that I am a profound skeptic about deep negative nominal interest rates. A slightly higher inflation target and policies to fight the asset price configuration called "secular stagnation" would largely obviate the need, and leave behind a problem easily and straightforwardly dealt with via expansionary fiscal policy. And we really do not know how such an institutional reconfiguration would actually work. Confronted with a choice between known and understood policies that would work, and new ones with unknown side effects and effects that might, I do not undertstand the enthusiasm for the second: Ruchir Agarwal and Miles Kimball: Enabling Deep Negative Rates to Fight Recessions: A Guide: "we (i) survey approaches to enable deep negative rates... (ii) establish... enabling

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I confess that I am a profound skeptic about deep negative nominal interest rates. A slightly higher inflation target and policies to fight the asset price configuration called "secular stagnation" would largely obviate the need, and leave behind a problem easily and straightforwardly dealt with via expansionary fiscal policy. And we really do not know how such an institutional reconfiguration would actually work. Confronted with a choice between known and understood policies that would work, and new ones with unknown side effects and effects that might, I do not undertstand the enthusiasm for the second:

Ruchir Agarwal and Miles Kimball: Enabling Deep Negative Rates to Fight Recessions: A Guide: "we (i) survey approaches to enable deep negative rates... (ii) establish... enabling negative rates while remaining at a minimum distance from the current paper currency policy and minimizing the political costs; (iii) discuss why standard transmission mechanisms... are likely to remain unchanged in deep negative rate territory; and (iv) present communication tools that central banks can use...

Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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