Many
economists regard asset purchases as the most powerful tool the Federal
Reserve could use to stimulate the economy. But Michael Woodford, an
economics professor at Columbia University, argued Friday that a second
option would actually be much more effective – both because it would
have significant economic benefits, and because the benefits of asset
purchases are significantly overstated.
The option
favored by Professor Woodford is a modified version of the Fed’s
statement that it intends to keep interest rates near zero until late
2014. In a paper presented at
the annual monetary policy conference in Jackson Hole, he said that the
Fed should instead declare its intention to hold down interest rates
until the economy meets certain benchmarks, like a specified increase in
economic output. In other words, to boost growth now, the Fed must
promise to tolerate higher inflation later.
No comments:
Post a Comment