Central Bankers Should Weigh GDP Targeting, Woodford Says
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Central bankers should adopt a clear policy goal, such as the path for nominal gross domestic product, to make remaining easing options more effective under the limits of near-zero interest rates, according to Michael Woodford, a professor of political economy at Columbia University.
Such criteria would increase the impact of efforts to reset public expectations for interest rate policy, such as asset-purchases, Woodford said. Federal Reserve policy makers have kept the benchmark rate near zero since December 2008 and this month reiterated a plan to keep borrowing costs at record lows through at least late 2014.