Sunday, September 2, 2012

A monetary policy offset does not mean that the impact of fiscal policy on output is zero. A monetary policy offset means that you have shitty central bankers.

That's all.


  1. The fiscal multiplier is non-zero. The monetary policy multiplier is non-zero.

    The central bank is going in the wrong direction.

    Monetary policy is a free variable. The same guys (and gals, although too few of them) that vote on fiscal policy vote on central bankers. The exact same guys (and gals).

  2. This does not at all preclude the possibility that you also have shitty fiscal authorities.

  3. Replies
    1. No not at all actually. Did he write something about this recently? I was thinking more about Woodford and NGDP level targeting and that the whole point is that that would be monetary policy supporting rather than working against fiscal policy and ought not to feed this "fiscal policy has no effect" hysteria.

      Sometimes I think of something in my head, get mad about it, and have to write a short post to let off steam.

  4. I seem to have missed the hysteria!

    Anyway, Delong a while ago had a couple of posts backing up what apparently he and Summers were arguing when they were promoting their paper that in "normal times" (not at the ZLB) fiscal policy multipliers would always be zero because the Fed would automatically offset any fiscal policy because of output targeting.


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