Monetary base injections

Permanent vs temporary monetary base expansion

David Beckworth argues that the Fed’s inability to commit to a permanent expansion of the monetary base at the ZLB rendered its policy ineffective. Paul Krugman agrees and argues that for the private sector to be convinced that there has been a permanent shift in the central bank’s objectives the central bank needs to “credibly promise to be irresponsible”

How does a permanent monetary base expansion looks in practice:
Krugman: Look at Japan during Abenomics

Beckworth: Look at Israel during Stanley Fischer’s tenure

Permanent versus temporary monetary base Injections: Implications for past and future Fed Policy
Author: David Beckworth
From:George Mason University

What should have been the lesson learned?

Given the way experience has undermined much of the original case for a 2 percent inflation target, and given the severity of the economic crisis, you might therefore have expected some revision – a rise in the inflation target, or a shift to some other kind of targeting – price level or nominal GDP targeting. But that hasn’t happened. Even though a 2 percent inflation target is an essentially arbitrary number, it has become a focal point, a sort of token of respectability that almost no central bankers are willing to meddle with.

It’s Baaack, Twenty Years Later
Author: Paul Krugman
From: City University of New York