Read it at Interfluidity
I first “met” Haitao Zhang seven or eight ago, when we were both frequent commenters at Brad Setser’s remarkable blog. After I wrote about NGDP targeting, Zhang forwarded to me a paper he composed and sent around several years ago. He has graciously given me permission to republish it.
Haitao Zhang’s macro stabilization proposal
by Steve Randy Waldman
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Things are moving in the direction of fiscal rather than monetary in the face of the recent failure of even extreme monetary policy to address the fallout from the financial crisis and its contagion to the real economy, resulting in intractable high unemployment and a languid recovery.
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2 comments:
that should be on required reading list
I’m in favour as per Zhang’s proposal of giving central banks limited rights to alter fiscal spending. But I’ve got doubts about his idea that “electronic national market be set up to give voters direct control over where stimulus is applied”. Voters ALREADY HAVE a say at election time on what proportion of GDP is allocated to public spending, and how that is split as between education, the military etc.
The latter voting process could be vastly improved via the electronic system that Zhang proposes. (Although that would take power from politicians, and put more power into the hands of the people – shock, horror: self-proclaimed “pro-democracy” politicians would be up in arms at making their country more democratic.)
I.e. Zhang’s proposal to have electronic voting EVERY TIME the amount of stimulus is altered to going too far.
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