Monetary policy in 2050: evidence from Metaculus
basilhalperin.substack.com
Monetary policy in 2050: evidence from Metaculus
Link: https://basilhalperin.com/essays/metaculus-monetary-policy.html
I’ve posted a set of questions to the forecasting platform @metaculus on “monetary policy in 2050”
These are the questions on future policy for which knowing the answers today would have the highest value IMO (for policymakers, but also for researchers!)
Will the Federal Reserve set a target policy rate that is negative by 2050?
Current forecast (n=19): 53%
metaculus.com/questions/8968…
When is the next time the US policy rate will reach the zero lower bound?
Current forecast (n=10): 2028
metaculus.com/questions/1046…
How many times will the US policy rate reach the zero lower bound by 2050?
Current forecast (n=9): 3.3
metaculus.com/questions/1046…
When will the United States abolish physical, non-interest bearing cash?
Current forecast (n=14): after 2050
metaculus.com/questions/1046…
When will China abolish physical, non-interest bearing cash?
Current forecast (n=6): 2034
metaculus.com/questions/1046…
Will the Federal Reserve ever adopt a policy regime that implements nominal GDP targeting or nominal wage targeting?
Current forecast (n=21): 45% 👀 (seems high to me!)
metaculus.com/questions/1045…
If you don’t like these forecasts, you can easily make your own! (for free, Metaculus is not a prediction market)
Thanks, these were great!
I was unclear why interest rates would be less likely to fall to zero with NGDP targeting. Yes, you would still have higher interest rates of say 2% if GDP is expected to grow that amount. However in a demand shock as GDP shrinks, the inflation rate would rise to compensate. But presumably the same amount of QE would be required? I do not see how that is different from the status quo.
The Angeletos paper somewhat dispelled these confusions. When there is a negative shock, firms will decrease production relative to their belief about the magnitude of the shock and the price level should increase as a function of the aggregate of those beliefs. NGDP targeting allows this to be the case more consistently than inflation targeting, which, I suppose is less sensitive to the state of the real economy. Am I close?