Monday DeLong Smackdown: Federal Reserve "Forward Guidance" Weblogging
With facts confusing me again he is:
Robert Waldmann: "Ah, yes a bold Volcker-like regime change...
...would move expectations. Thus we recall that Volcker's obvious extreme determination to fight inflation caused an anomaly in inflation expectations controlling for lagged inflation.
Based on the Livingston expectations survey we know that supposed experts had significantly different inflation forecasts when Volcker was chairman than when Burns was chairman (coefficients on dummies in regressions of the median Livingston inflation forecast which include lagged personal consumption expenditure deflator minus food and energy inflation). Yes, conditional on Volcker being chairman they forecast significantly higher inflation. This is an elementary statistic published (on the web). Can you reconcile your recollection with this datum?
http://angrybearblog.com/2014/03/inflation-expectations-credibility-and-paul-volcker.html | http://angrybearblog.com/2014/04/inflation-expectations-in-the-usa.html
I think it is totally wrong to claim that there was a Volcker change of regime which affected outcomes through expectations beyond the effect through pushing the fed funds rate up about 10% and causing high unemployment. Volcker could overcome the most stubborn inflation phobia because there isn't an upper bound on the federal funds rate. The evidence from the Volcker years strongly undermines that your view that some sort of more vigorous forward guidance would work.
You can still argue that FDR didn't do much of anything so whoever was Fed chair was key to the recovery. Or you could look at the effect of Kuroda (have you ever noticed that the case for monetary policy working is based on Abenomics and Abe is leader of the majority which controls fiscal policy and not a central banker)
Haruhiko Kuroda or Hjalman Horace Greeley Schacht are your examples. Not FDR (who was you know president not chairman) abd certainly certainly not Paul Volcker...."
