Over at Equitable Growth: I have said this before. But I seem to need to say it again...
The very intelligent and thoughtful David Beckworth, Simon Wren-Lewis, and Nick Rowe are agreeing on New Keynesian-Market Monetarist monetary-fiscal convergence. Underpinning all of their analyses there seems to me to be the assumption that all aggregate demand shortfalls spring from the same deep market failures. And I think that that is wrong.
Simon Wren-Lewis writes:
I really like David Beckworth’s Insurance proposal against ‘incompetent’ monetary policy. Here it is: 1) Target the level of nominal GDP (NGDP). 2) "The Fed and Treasury... agree... should a liquidity trap emerge anyhow... quickly work together to implement a helicopter drop...." Market Monetarists and New Keynesians [do not] suddenly agree about everything... for David this is an insurance against incompetence by the central bank, whereas Keynesians... view hitting the ZLB as unavoidable if the shock is big enough. However this difference is not critical... READ MOAR