Scott Sumner responds on ngdp

Here is Scott’s lengthy response, do read the whole thing.

While I definitely favor having an ngdp futures market, and think it might improve monetary policy, its existence would not change (at all) any of the basic issues in my previous post.  Closer to the central point I think is Scott’s claim: “Any “real shock” that reduces NGDP expectations because the Fed responded passively is also a monetary shock.”  For me that is a real shock with insufficient monetary accommodation, not a “real shock,” as Scott gave it quotation marks, and also not a monetary shock.  I prefer not to smush real and monetary shocks together in that fashion, and I think some ngdp theorists are trying to claim an explanatory victory by fiat by doing so.  I do not think this matters for policy, and as I’ve stated I am very sympathetic to market monetarist recommendations.  But in terms of explaining downturns, again, I think they are trying to claim some victories by fiat.


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