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July 12, 2005

Mark Thoma Finds William Poole and Milton Friedman Thinking About the Greenspan Succession

Mark Thoma writes about people's preliminary thoughts on the Greenspan Succession--not people but processes. Noteworthy is Milton Friedman's shift of ground from rigid quantity targets--as things that ought to produce good results and that cannot be gamed--toward some version of inflation-rate targeting:

Economist's View: William Poole and Milton Friedman on Inflation Targeting and the Post-Greenspan Fed: Interesting comments by St. Louis Federal Reserve Bank President William Poole on his support of inflation targeting, the transition to a new Fed chair and how that might affect the Fed’s credibility, his discomfort with language such as “measured,” and other matters. Comments by Milton Friedman in support of inflation targeting are also noteworthy given his long-standing advocacy of quantity targets...

A paragraph from Poole:

As far as I know, there has been no comprehensive study of the characteristics of the Greenspan regime. To extend the regime will require an understanding of just what the regime is. My purpose is to outline some thoughts on that issue by discussing four key characteristics of the Greenspan regime. First on my list is low-inflation credibility--that is, market confidence that the Federal Reserve will conduct policy to yield low inflation averaged over any span of a few years. The other three characteristics of the Greenspan regime are successful crisis management, empirical understanding of the economy, and predictability of monetary policy. I'll comment on all four, but concentrate on predictability issues as these are, I believe, the most interesting of the characteristics of the Greenspan regime...

Posted by DeLong at July 12, 2005 03:02 PM