tag:blogger.com,1999:blog-2546602206734889307.post2711720791382167513..comments2024-03-19T08:41:43.759+00:00Comments on mainly macro: Monetary Policy InnovationsMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-2546602206734889307.post-78986663617721888312013-08-01T05:07:11.029+00:002013-08-01T05:07:11.029+00:00I came back to read this post again as I thought a...I came back to read this post again as I thought about what is (not) being done.<br />However, my question arises from another concern. May it not be the case for an earnings growth target that the problem is partially the same as with CPI inflation? I mean, if today we miss the target, tomorrow will not have to "make up for it", so we are left the same with future expectations. Isn't this right somehow?<br /><br />Thank you in advance.Mateusnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-89462629586209485592012-12-14T22:37:40.639+00:002012-12-14T22:37:40.639+00:00We discussed in previous posts about the risk inhe...We discussed in previous posts about the risk inherent in raising inflation expectations when private households are indebted and busy deleveraging. I argued that indebted household might anticipate the wage squeeze to worsen because wages do not adjust for higher inflation due to weak bargaining power for employees worried about hanging on to their job. In response to an uncertain employment outlook deleveraging HH would thus reducing their consumption further, which would depress aggregate demand, further weaken the employment outlook which would feed a vicious cycle with further belt tightening. The adoption of the NGDP target would institutionalise this vicious cycle by introducing an automatism into it. Wouldn't the new target command an increase in expected inflation in response to lower aggregate demand due to lower private consumption? And what would be the response of indebted private households when the NGDP target is credible? Further belt tightening? In the meantime, corporate investment might fail to materialise due to expected sluggish private consumption. Paolo Sicilianihttps://www.blogger.com/profile/09825138088772562228noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-11504587485219078952012-12-14T17:53:45.186+00:002012-12-14T17:53:45.186+00:00My guess is that it's never that clear cut. Es...My guess is that it's never that clear cut. Especially in the current UK situation, where expectations/guidance/pre-commitment are so important. The Government would like to have the central bank fully onside, rather than making (and being seen to make) a half-hearted Sir Humphrey attempt to pretend to play along.<br /><br />(It's not really clear cut in Canada either, after the Coyne affair, and the more minor non-renewal of John Crow. They have ducked the question, by saying 2% IT is a joint agreement between BoC and the govt.)Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-56862821964581620502012-12-14T17:44:05.895+00:002012-12-14T17:44:05.895+00:00Simon: "...could it be that his remarks about...Simon: "...could it be that his remarks about normal times can be read as 'Canada today', while his remarks about the ZLB case can be read as 'UK today'?"<br /><br />That is how I read them. Not with certainty, but it did seem the most plausible reading.<br /><br />There's a very strong sense in Canada of "It (IT) ain't broke; don't fix it". A rather complacent/smug attitude. Because maybe we just got lucky (or even if it was partly good bank regulation/supervision, the BoC was still lucky that bank regulation/supervision was good). And because we still had a recession (though not a bad one), even though the BoC kept inflation roughly on target.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-70347633694627510262012-12-14T12:47:40.265+00:002012-12-14T12:47:40.265+00:00But the monetary framework in the UK is decided by...But the monetary framework in the UK is decided by the Chancellor, not the Governor. Yet Osborne is acting as if its the other way around. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-79176963667723718312012-12-14T12:38:14.065+00:002012-12-14T12:38:14.065+00:00If Osborne has already decided (w/Carney) to switc...If Osborne has already decided (w/Carney) to switch to NGDPLPT sometime next year his comments are roughly what you'd expect him to say, no? His actions (headhunting Carney) speak much louder than his words. Picking Turner would have been the action of a timid Chancellor who is happy with the status quo. Darling re-appointed King after King presided over the worst UK demand crisis in generations - what does that say about Darling?Britmousehttp://uneconomical.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-89220476214628234602012-12-14T12:21:31.282+00:002012-12-14T12:21:31.282+00:00I do not think the Chancellor will dismiss a recom...I do not think the Chancellor will dismiss a recommendation from Carney for such a change, for the reasons you give. It still does not make sense that he has waited for a new Governor: the Chancellor has the power to make this change, and the political capital that Mervyn King has is not large enough for that to worry him.<br /><br />But the Carney speech does not sound like it comes from someone who can see nothing wrong with NGDP path targets. You will know him and the context in which he talks better than I: could it be that his remarks about normal times can be read as 'Canada today', while his remarks about the ZLB case can be read as 'UK today'? In other words, why has he not pushed more for NGDP targets in Canada? Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-35405351213457454182012-12-14T11:55:47.973+00:002012-12-14T11:55:47.973+00:00My guess is that Mark Carney would not have taken ...My guess is that Mark Carney would not have taken the BoE job unless he had some sort of commitment from the Chancellor to give him carte blanche to do what he needed to do. It might have been a specific commitment to move to NGDPLPT. And Carney was in a strong bargaining position to get that commitment. It seems he didn't really want the job, especially if taking the job would mean he would switch from being seen as a success (at the BoC) to being seen as a failure (after 5 years at the BoE).Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-57771359367536710932012-12-14T08:56:33.578+00:002012-12-14T08:56:33.578+00:00ah, yes. Monetary policy innovations. Let me quote...ah, yes. Monetary policy innovations. Let me quote Alan Greenspan in 2000:<br />"I believe that the general growth in large [financial] institutions have occurred in the context of an underlying structure of markets in which many of the larger risks are dramatically -- I should say, fully -- hedged."Anonymousnoreply@blogger.com