Carney on NGDPLT

Mark Carney appeared at the Treasury Select Committee today for interrogation before being confirmed as the next Governor of the Bank of England. The big question everybody wanted answered is whether he favoured a move from inflation targeting to NGDP level targeting. The answer is ‘no’, but the reasons are interesting.

Carney is a known proponent of central bank commitment and the use of forward guidance. In recent speeches he has also spoken favourably of NGDPLT and that has prompted a storm of commentary in the UK; little of it was favourable towards the idea. Consequently, all eyes were on Carney’s evidence today. Reading the comments on Twitter suggests that he dismissed NGDPLT and retreated from his previous statements. I don’t think that is true at all.

In both his oral and written evidence he called flexible inflation targeting  “the most effective monetary policy framework implemented thus far.” However, he was at pains to point out that there are problems with it at the ZLB and there are other potential regimes, such as NGDPLT, that might help in those circumstances. In his oral evidence he spoke at length about the benefits of commitment and history dependence when encountering the ZLB. Despite that, he was not in favour of an immediate move away from inflation targeting, as you might expect given the outcome of the Bank of Canada’s review. Some of the reasons he gave are well-known: the problem of revisions and data quality, for instance. Notably, he did not think that NGDPLT would unhook inflation expectations and commented on the additional credibility a central bank could gain by implementing an inflexible rule.

The most interesting argument he made against level targeting was the one he dwelt on in his oral evidence: it relies upon people having rule-consistent expectations. That is to say, the success of a central bank relies on people expecting that it will implement its stated plans, and behaving as if they will come to fruition. Of course, he did not make the naive argument that people’s expectations are irrational. Rather, he pointed out that expectations among the populace have inertia and take time to change. If a large portion of the population have persistently incorrect expectations following a change in target then it would be costly in terms of welfare. He alluded to agent-based modelling done by the Bank of Canada to claim that these transitional costs as expectations gradually adjust could outweigh the gains to the switch.

In summary, he thinks NGDPLT is a great idea but hard to put into practice (data issues) and costly to implement (transitional costs of changing expectations.) Relative to the commentary in the UK press that is a ringing endorsement: one of the top central bankers in world says that the only real barrier is the details of implementation.

  • boristhefrog

    Yeah… traveling faster than the speed of light is also a great idea… just a small problem of implementation…. Still… it seems that the great British press are as clued up on economic matters as the good old NZ press….

  • MediterraneanUniversity

    Live better
    through eating? Deal with certain disorders in our bodies thanks to a model diet? Lead a
    more enjoyable life and, according to authors, live longer?… All these
    questions are answered in the affirmative in The Mediterranean Diet.

    In
    this sense, the reason for this release is to introduce our Organization and
    the training offer which is offered in collaboration with the CRESCA-UPC
    (Centre for research in Security and Control Food of the Polytechnic University
    of Catalonia).

    The International Mediterranean
    Wellness University
    collaborates in the techno-pedagogical design and implementation of specialized
    training in the prevention and treatment of certain disorders through the
    application of the beneficial properties that are found in food, water and
    places belonging to the Mediterranean lifestyle and the Mediterranean diet.

    Understanding that health issues must be
    treated with extreme professionalism throughout the training, which is endorsed
    by the results derived from scientific evidence, so that the student may
    practice as a professional specialized in this field.

    Medicine based on scientific evidence
    justifies the therapeutic benefit of the Mediterranean diet and, since 2010,
    UNESCO has awarded it the acknowledgment of being an Intangible Heritage for Humanity.

    Thus, under this scenario, the M.I.W. University has proposed to be the
    model with the ability to offer:

    Educational programs specialized on a nutritional and
    therapeutic approach to common disorders of large systems (respiratory,
    cardiovascular, neurological, digestive system, etc.) as well as most common
    chronic-degenerative, diseases based on the benefits of the Mediterranean diet.

    The training is aimed at
    professionals linked to the world of health, nutrition and diet who want to
    acquire skills and knowledge in the area of the Mediterranean diet as a tool
    for the treatment and prevention of these disorders and the most common
    chronic-degenerative diseases. For example:

    Health
    personnel

    Nutritionists

    Other
    professionals who carry out their activity in the areas
    of:

    ·
    socio-health care,

    ·
    psychological care,

    ·
    ancillary care,

    ·
    caring for people in a
    situation of dependency

    Students
    in health science-related degrees.

    Staff of
    the restauracion-hosteleria intending to innovate their
    facilities under this specialization.

    All of them will
    have a differentiating and innovative value thanks to this training recognized
    by CRESCA-UPC and supported by the scientific evidence of the e-S Health
    Organization experts.

    Our
    training is provided in two ways:

    • Presencial training: at the premises of Alcanar (Tarragona, Spain)

    • Videoconference training: designed by experts and hight tech
    platforms that offer students training without leaving your home or workplace,
    with the same efficiency of the presencial way.

    Finally,
    note that next March 2013, there are two specialization courses of very high
    concern (brocure attached), both in the two methods outlined above:

    • Mediterranean Bromatology (Food Science). Coordinator: Dr. Pedro
    Monagas

    • Mediterranean Diet for active aging treatment and cognitive decline
    disorders. Coordinator: Dr. Roberto Vimbert

    • Mediterranean Diet anti-aging treatment. Coordinator: Dr. Pedro
    Monagas

    After
    passing the course, the Diploma will be awarded accordingly.

    For more
    information go to our website, send us an email or phone us.

    We are
    available to answer any questions you may have.

    Kind
    regards.

    Javier Resa
    Navarro

    CEO –
    M.I.W. University

    xresa@mediterraneanuniversity.com

    http://www.mediterraneanuniversity.com

    (34) 902.00.99.44

    (34)
    668.82.98.98

  • Pingback: Overhyping nothing: The NZ context for the UK FSA speech | The Dismal Science