A Call for Action: Conditional Inflation Targetting

From an article by myself and Jeffry Frieden in the newly released Foreign Policy:

[We need] inflation — just enough to reduce the debt burden to more manageable levels, which probably means in the 4 to 6 percent range for several years. The Fed could accomplish this by adopting a flexible inflation target, one pegged to the rate of unemployment. Chicago Fed President Charles Evans has proposed something very similar, a policy that would keep the Fed funds rate near zero and supplemented with other quantitative measures as long as unemployment remained above 7 percent or inflation stayed below 3 percent. Making the unemployment target explicit would also serve to constrain inflationary expectations: As the unemployment rate fell, the inflation target would fall with it.

Continue reading →

The Year in Review: Fantastical Pseudo Economics

Since the media are full of “year in review” pieces, I thought I’d make a contribution of my own. One of the best things about being a blogger is being able to comment quickly on the most outrageous, nonsensical assertions presented in the guise of analysis. Here are my “ten best” (actually — most hilariously deluded) excursions into the fantasy world from my postings to Econbrowser. The inspirations range from Speaker Boehner’s math to the Heritage Foundation’s simulations (where have you gone, Bill Beach!)

Continue reading →

Regulatory Uncertainty, Macro Policy Uncertainty, and Demand

With the Republicans in the House maximizing policy uncertainty, I think it useful to recount some of the recent research on how uncertainty is affecting output. In particular, I want to go beyond the talking point which asserts that regulatory uncertainty is depressing output (data free analysis here), given that we know empirical results asserting the level of regulation depresses output are not robust [1].

Continue reading →

Guest Contribution: US Federal Regulatory Budget and Macroeconomic Outcomes: What Do We Know?

By Tara M. Sinclair

Today, we’re fortunate to have Tara M. Sinclair, Associate Professor of Economics and International Affairs and a scholar at the GW Regulatory Studies Center at The George Washington University, as a Guest Contributor.

There has been a lot of debate lately about the costs of regulation for the US economy. In a Regulatory Policy Commentary posted on December 19th, Kathryn Vesey, a research associate at the GW Regulatory Studies Center, and I discuss our preliminary findings from a study of the macroeconomic impacts of changes in the “regulators’ budget,” i.e. the part of the US federal government budget allocated to developing and enforcing federal regulations.

Continue reading →

Dispatches (XVII): “Things are continually and gradually moving in the right direction”

That’s the concluding line from the release issued by the Wisconsin Department of Workforce Development’s Secretary Reginald Newson. The preceding sentence is “The job numbers are a lagging indicator for economic conditions, and we will continue to move forward.” Here are two graphs, with updated DWD data incorporating revisions, and preliminary data for November, that place those comments in context.

Continue reading →