Tate Lacey has a interesting piece over at Alt-M, which suggests that the new Fed vice chair might be amenable to NGDPLT:
Clarida now seems predisposed to three views about monetary policy that could significantly influence the Fed’s actions going forward:
1. That a central bank fully committed to reaching a nominal target is superior to one focused on mechanical operations.
2. That employing forward guidance is indeed an effective tool for conducting monetary policy.
3. That level targeting can make up for past errors in monetary policy in a way that growth rate targeting cannot.
Combined, I think these views point to Clarida being more amenable to a nominal GDP target than even he may presently admit. After all, nominal GDP level targeting requires two things of a central bank to work in practice: first a central bank must credibly pledge to keep nominal GDP growing along a stable trend line and then it must be prepared to do whatever is necessary to achieve that level of nominal growth.
Clarida has already expressed the importance of both of these elements. In addition, he has repeatedly shown a willingness to let his thinking evolve when presented with new information. Therefore, he may yet be persuaded on the shortcomings of price level targeting in favor of a superior option.
Lacey acknowledges that this is speculative, but he is right to emphasize these aspects of Richard Clarida’s thinking on monetary policy.
This is also important, and it’s the step that many modern central banks are reluctant to take:
However, the second, subtle point in his framework that should not be ignored is that Clarida recommends the central bank fully commit to an outcome rather than announce various mechanical steps.
PS. The Hypermind NGDP contract for 2017-2018 just completed and growth came in at 4.8%. I was given the following information:
362 traders participated in this contest, and 224 (62%) made a virtual profit. This means 224 contest winners have earned a share anywhere from $4 to $1,038 from the $35,000 prize pool.
The 2018-19 NGDP futures contract is trading at 4.5%, which suggests to me that policy may be a tad too expansionary, but is still basically on course.
The market price has not been very volatile, which is perhaps disappointing if the market is viewed as a scientific experiment, but very positive if viewed as a technique for making NGDP more stable.