Woodford on QE3

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The Washington Post is carrying an interview with Michael Woodford on monetary policy.

On levels targets:

The idea that purely forward looking approaches are undesirable is something I’ve been emphasizing in various papers since the 1990s

On Sumner:

This theme is one that I had been pushing extensively even before the current crisis, both for reasons that relate to my general views on monetary policy, and the fact that I had been giving talks on responding to the zero lower bound in this general situation. So I already had a well worked out view of that kind. I don’t think it changed my mind about the importance of the particular themes

On the new open-ended, state contingent commitment:

I think that it’s an advantage of the approach taken in the statement yesterday that it’s more plausible that the committee would continue with the policy that’s being announced


  1. I don’t think Sumner minds [1]. I think he is honest enough to acknowledge that Woodford’s ideas have helped develop his own [2 – customise the date range to pre-2012]. However, it is clear that Woodford and Sumner differ on views of MP (rates vs money respectively) and consequently the implementation of MP (rates vs OMOs via NGDP futures markets – ignoring the unresolved details in the latter). [3]

    Who said this on December 22, 2011 [4]?
    > Michael Woodford and Lars Svensson might come out of this as heroes

    [1] http://www.themoneyillusion.com/?p=16264
    [2] http://www.google.com.au/#hl=en&sclient=psy-ab&q=woodford+site:themoneyillusion.com&oq=woodford+site:themoneyillusion.com
    [3] http://www.themoneyillusion.com/?p=1791
    [3] No cheating. Google the phrase.

  2. Great – so now the Fed has imposed a new tax on the US economy – and this tax is growing to the extent QE remains in place (which could be forever). And this is supposed to help growth?

    The big question is “how will markets react when they realise QE does not work, and the Fed is truely out of bullets”

  3. Ha, ha.. All the Sumner fanboys (myself included) have gone on to his blog to say Woodford is being a bit churlish.

  4. I have seen that on a forward looking Taylor rule interest rates should be around -2% so the QE needed is not as much as in the past

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