Googling "Inflation targeting" and "fiscal stimulus"

I'm encouraged by a recent uptick in discussion about inflation targeting among some influential economists.

Brad Delong asks whether it's "time for some hand-forcing at the Fed." This in response to a very nice post by David Beckworth, which was partly in response to Bernanke's  unconvincing answer to Brad Delong's question to Bernanke about why the Fed isn't targeting a 3% inflation rate.

Paul Krugman then compares Ben Bernanke to Montague Norman.

Mark Thoma still thinks the focus should be on fiscal stimulus rather than inflation targeting or quantitative easing (there are subtle differences betweeen IT and QE--see Krugman).

I can understand why economists (a characteristically conservative bunch) would be worried about announcing a new inflation target and vigorously enforcing it with bond purchases.  Unhinging inflation expectations from a very stable 2.5 percent could have unanticipated consequences. 

But aside from knee-jerk conservativism, I see no reason (ie., no compelling model) in which a modest increase in the inflation target could be bad thing.  So I wonder, what is Ben Bernanke's loss function?  What is the scenario in which changing the inflation target would be a bad thing?  How bad would it be?  And what odds does he place on inflation targeting being a bad thing as opposed to it being a good thing, as most models indicate it would be? 

Bernanke may be the best person for the job as Chairman of the Federal Reserve.  But with unemployment at 10 percent and likely to stay that high for a long time, Ben Bernanke owes us clear answers to these questions.

Anyway.  I like the invigorated discussion of inflation targeting and quantitative easing vs. fiscal stimulus.  Still, it is disappointing this discussion has come so late and remains so subdued. 

How subdued? Well, today I took the pulse of "fiscal stimulus" and "inflation targeting" on Google News.  "Fiscal stimulus," with quotes, gets 1,712 hits, 10,538 hits without.  "Inflation targeting" gets 113 hits with quotes, 332 without . 

These results are not surprising.  But they do show a sad disconnect between modern macroeconomic thinking and what the public gets told through traditional media.  That might change if Krugman were to start writing more about inflation targeting in his headline column rather than just his blog.  With the economy likely to remain sluggish for awhile I expect this will happen eventually.


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