Question A:
If the Fed changed its inflation target from 2% to 3%, the long-run costs of inflation for households would be essentially unchanged.
Responses
Responses weighted by each expert's confidence
Question B:
The Fed’s revised strategy announced in 2020 - focusing on employment shortfalls and with a more flexible interpretation of the inflation target - has made little practical difference to monetary policy outcomes in the past five years.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Daron Acemoglu |
MIT | Did Not Answer | Bio/Vote History | |
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 Mark Aguiar |
Princeton | Bio/Vote History | ||
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 Joseph Altonji |
Yale | Bio/Vote History | ||
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Not my area of expertise, but I worry that the higher target will reduce confidence that the Fed will actually adhere to the target
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 Alan Auerbach |
Berkeley | Bio/Vote History | ||
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 David Autor |
MIT | Bio/Vote History | ||
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 Abhijit Banerjee |
MIT | Bio/Vote History | ||
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 Dirk Bergemann |
Yale | Bio/Vote History | ||
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 Marianne Bertrand |
Chicago | Bio/Vote History | ||
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 Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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 Judith Chevalier |
Yale | Bio/Vote History | ||
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 David Cutler |
Harvard | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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This could easily anchor inflation expectations at a higher level, caused by "moving the goal posts" before the Fed gets inflation back down to 2%. Higher inflation expectations would lead to higher inflation.
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 Aaron Edlin |
Berkeley | Bio/Vote History | ||
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 Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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 Liran Einav |
Stanford | Bio/Vote History | ||
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 Ray Fair |
Yale | Bio/Vote History | ||
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 Edward Glaeser |
Harvard | Bio/Vote History | ||
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 Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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 Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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 Oliver Hart |
Harvard | Bio/Vote History | ||
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 Bengt Holmström |
MIT | Bio/Vote History | ||
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 Caroline Hoxby |
Stanford | Bio/Vote History | ||
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 Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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 Erik Hurst |
Chicago Booth | Bio/Vote History | ||
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 Kenneth Judd |
Stanford | Bio/Vote History | ||
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Uncertainty in inflation is the major cost of inflation. If we change the target this year, then why not change the target next year? Once the Fed picks a target, it should stay with it. Otherwise, the notion of a "target" is vacuous.
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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If you believe the Greenspan, no one notices is the right level, 3% over 25 years cumulates to an uncomfortable place.
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 Pete Klenow |
Stanford | Bio/Vote History | ||
 Jonathan Levin |
Stanford | Bio/Vote History | ||
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 Eric Maskin |
Harvard | Did Not Answer | Bio/Vote History | |
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 William Nordhaus |
Yale | Bio/Vote History | ||
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Transition would lead to confusion and loss of confidence in short run, particularly if seen as loss of Fed independence. In longer run, slight increase in inflation costs with little gain.
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 Maurice Obstfeld |
Peterson Institute for International Economics | Bio/Vote History | ||
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 Parag Pathak |
MIT | Bio/Vote History | ||
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 Larry Samuelson |
Yale | Bio/Vote History | ||
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At 2% inflation, prices rise by a factor of 2.7 times in 50 years, 7.2 times in 100 years. At 3% inflation, prices rise by factors of 4.4 (50 years) and 19.2 (100 year). For young adults, the planning horizon may be 50-75 years, making these differences significant.
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 José Scheinkman |
Columbia University | Bio/Vote History | ||
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Inflation volatility may turn out to be higher at 3% than at 2%, increasing welfare losses.
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 Richard Schmalensee |
MIT | Bio/Vote History | ||
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 Fiona Scott Morton |
Yale | Bio/Vote History | ||
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 Carl Shapiro |
Berkeley | Bio/Vote History | ||
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 Robert Shimer |
University of Chicago | Bio/Vote History | ||
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2% is a credible target given its history. Once the Fed changes the target once, it will take time for new target to become credible. Additionally, even modest inflation seems costly to households.
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 Stefanie Stantcheva |
Harvard | Bio/Vote History | ||
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 James Stock |
Harvard | Bio/Vote History | ||
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 Nancy Stokey |
University of Chicago | Bio/Vote History | ||
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It would be a signal of weakness in the Fed's commitment to low inflation.
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 Chad Syverson |
Chicago Booth | Bio/Vote History | ||
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So many contingencies here. E.g., if move to 3% comes before return to targeted 2%, then this could be viewed as failure to meet commitments and affect efficacy of policy going forward. OTOH a pre-announced move to 3% after inflation falls to 2% target might have little effect.
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 Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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Who will join me in renouncing the need for an integer inflation target? My preferred target is e but would be happy with pi.
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 Christopher Udry |
Northwestern | Bio/Vote History | ||
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I don't have a sufficiently well-calibrated mental model of inflation costs to judge this kind of change.
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 Ivan Werning |
MIT | Bio/Vote History | ||
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The standard welfare effects may be small, given that the change is small, but not unchanged. In addition, research points to people disliking inflation more than rational welfare consequences can usually explain.
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Daron Acemoglu |
MIT | Did Not Answer | Bio/Vote History | |
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Mark Aguiar |
Princeton | Bio/Vote History | ||
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Joseph Altonji |
Yale | Bio/Vote History | ||
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Alan Auerbach |
Berkeley | Bio/Vote History | ||
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David Autor |
MIT | Bio/Vote History | ||
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Abhijit Banerjee |
MIT | Bio/Vote History | ||
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Dirk Bergemann |
Yale | Bio/Vote History | ||
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Marianne Bertrand |
Chicago | Bio/Vote History | ||
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Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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Judith Chevalier |
Yale | Bio/Vote History | ||
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David Cutler |
Harvard | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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The stated policy sent a message that the Fed would be willing to tolerate more inflation, for a while, in order to reduce employment shortfalls. And the Fed did tolerate more inflation for a while than it would have been expected to under prior strategies.
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Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Liran Einav |
Stanford | Bio/Vote History | ||
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Ray Fair |
Yale | Bio/Vote History | ||
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Edward Glaeser |
Harvard | Bio/Vote History | ||
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Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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Oliver Hart |
Harvard | Bio/Vote History | ||
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Bengt Holmström |
MIT | Bio/Vote History | ||
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Caroline Hoxby |
Stanford | Bio/Vote History | ||
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Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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Erik Hurst |
Chicago Booth | Bio/Vote History | ||
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Kenneth Judd |
Stanford | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Pete Klenow |
Stanford | Bio/Vote History | ||
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Jonathan Levin |
Stanford | Bio/Vote History | ||
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Eric Maskin |
Harvard | Did Not Answer | Bio/Vote History | |
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William Nordhaus |
Yale | Bio/Vote History | ||
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Hard line and inflexible stance would destabilize.
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Maurice Obstfeld |
Peterson Institute for International Economics | Bio/Vote History | ||
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Parag Pathak |
MIT | Bio/Vote History | ||
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Larry Samuelson |
Yale | Bio/Vote History | ||
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The Fed brought inflation to 3% relatively easily, with further reductions more elusive. It is not clear whether, even if the Fed were more focused on inflation, that it would have incurred the cost to bring inflation lower.
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José Scheinkman |
Columbia University | Bio/Vote History | ||
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Richard Schmalensee |
MIT | Bio/Vote History | ||
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Fiona Scott Morton |
Yale | Bio/Vote History | ||
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Carl Shapiro |
Berkeley | Bio/Vote History | ||
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Robert Shimer |
University of Chicago | Bio/Vote History | ||
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Stefanie Stantcheva |
Harvard | Bio/Vote History | ||
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James Stock |
Harvard | Bio/Vote History | ||
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Long term inflation expectations remained anchored throughout the 2022-2024 inflation. Short term expectations movements are confounded by energy prices which were (in my view) the main driver of that inflation, not drifting expectations.
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Nancy Stokey |
University of Chicago | Bio/Vote History | ||
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Why did the Fed keep rates so low coming out of Covid?
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Chad Syverson |
Chicago Booth | Bio/Vote History | ||
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Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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Christopher Udry |
Northwestern | Bio/Vote History | ||
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Ivan Werning |
MIT | Bio/Vote History | ||
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Too early to tell. It hasn't been a long time and the post-covid inflation surge (worldwide) is too noisy data point to judge US framework. In addition, the "framework" is ambiguous/not specific enough and US policy is, thus, quite discretionary. Thus, it may not matter.
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