Each Fed statement, they inch a bit closer to market monetarism. The newest statement lowered the forecasts for the future level of interest rates (the so-called dot plot) by about 50 basis points. That’s still too high, but no longer as out of touch as they were a year or two ago. Kudos to Kocherlakota and Bullard for seeing the light before the rest of the FOMC. The long-term trend RGDP growth estimate was lowered again, this time from from 2.0% to 1.8%. That’s still too high, but it’s getting closer to my estimate of 1.2%. (The actual growth rate over the past decade has been 1.28%, but I believe the trend is still slowing.)
Question: Has any school of thought been more accurate than market monetarism, over the past 8 years, regarding these issues:
1. QE is expansionary.
2. Negative IOR is expansionary.
3. Forward guidance can be expansionary.
4. Low rates are here to stay.
5. Inflation won’t be a problem.
6. NGDP and RGDP growth will be slower than the Fed expected.
7. Sweden erred in not following Svensson’s advice.
8. Trichet screwed up in 2011.
9. Monetary policy would offset fiscal austerity in 2013
10. Cross-sectional evidence for fiscal stimulus vanishes when confined to countries with independent monetary policy.
11. Denmark would not be forced to revalue their currency upwards.
12. Ending extended unemployment insurance in 2014 would accelerate job growth by about 1/2 million.
13. Abenomics would increase Japan’s inflation rate.
14. Switzerland would make their zero bound problem worse by revaluing the franc.
15. “Austerity” would not stop the UK unemployment rate from falling to full employment.