Or at least he says something here that no Monetarist would say:
"Business Insider contacted him about his 2009 warning that soaring inflation and interest rates were just around the corner — and he not only admits that he was wrong, he admits that his error signified something wrong with his overall economic model:
Krugman praises him for actually admitting that he's wrong. What I find interesting is that he's very unMonetarist at least here. Yet even Krugman thinks increasing the monetary base is usually expansionary:
"As I pointed out again and again, basic IS-LM analysis said that even huge increases in the monetary base aren’t inflationary in a liquidity trap; and yes, I was making that prediction in advance. From where I sit, our models have worked just fine."
Even Krugman isn't ready for the idea that the monetary base is never very important.
http://diaryofarepublicanhater.blogspot.com/2013/12/sumners-old-wine-in-new-bottles-scourge.html
So even he's usually a Monetarist.
"Business Insider contacted him about his 2009 warning that soaring inflation and interest rates were just around the corner — and he not only admits that he was wrong, he admits that his error signified something wrong with his overall economic model:
http://krugman.blogs.nytimes.com/2014/01/03/in-praise-of-art-laffer/?_r=0“Usually when you find the model this far off, you’ve probably got something wrong with the model, not that the world has changed,” he said. “Inflation does not appear to be monetary base driven,” he said.
Krugman praises him for actually admitting that he's wrong. What I find interesting is that he's very unMonetarist at least here. Yet even Krugman thinks increasing the monetary base is usually expansionary:
"As I pointed out again and again, basic IS-LM analysis said that even huge increases in the monetary base aren’t inflationary in a liquidity trap; and yes, I was making that prediction in advance. From where I sit, our models have worked just fine."
Even Krugman isn't ready for the idea that the monetary base is never very important.
http://diaryofarepublicanhater.blogspot.com/2013/12/sumners-old-wine-in-new-bottles-scourge.html
So even he's usually a Monetarist.
I would not say "usually." Krugman is a monetarist and he recognizes that that the ISLM model doesn't work in a liquidity trap, so fiscal policy may be needed. But notice, he also thinks that monetarism would work if the cb could use negative interest rates to manage the real rate. So the problem for Krugman is not with a break down of monetarism but that modern cg's cannot set the interest rate on negative.
ReplyDeleteOops. Should be "modern cb's" in the last sentence. For some strange reason my interactive spelling checker "corrected" it.
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