Friday, May 11, 2012

Does anybody have any reactions to the recent market monetarist debate on negative real interest rates?

Between finals, grading, and buying the house (closed yesterday afternoon - I'm a homeowner!) I haven't had time to read closely.

I did get a fairly close read of Bill Woolsey's post. My reaction to that was:

1. Right, that's pretty much what Krugman said about monetary policy in a liquidity trap in the 90s - so, as I suspected, there's not much difference between Sumner and Keynesians.

2. The points about raising real interest rates is not a concern for us if its done as a result of increased output (that's the whole point!), and Bill's switch from moving the LM curve to moving the IS curve is precisely why we think fiscal policy is a good idea (because it guarantees we're working through more than just the interest rate mechanism).

But I read quickly so I may be missing the point that they were getting excited about - anyone have any thoughts?

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